In this article, we will learn about market cap, how many TOS are market cap and also know about their important concepts which will be very helpful for you.
Large Cap Mid Cap Small Cap
There are two stock exchanges operating in India; In which more than 1600 companies are listed in National Stock Exchange NSE and more than 5000 companies are listed in Bombay Stock Exchange BSE.
In order to invest in equity funds and to maintain uniformity in investment, SEBI has divided it into three parts on the basis of market capitalization of the company. These are large cap, mid cap and small cap.
AMFI (Association of Mutual Funds in India) lists such stocks which are used for investing in mutual funds.
AMFI updates this list twice a year (in January and December) on the basis of full market capitalization of companies. The update of the list means that in the next list, a large cap may become a mid cap or a small cap may also become a mid cap.
How is Large Cap Mid Cap and Small Cap Determined?
To understand this, we need to understand about market capitalization. Any company that is listed on the stock exchange; It has a share price, and its total outstanding shares.
We can calculate the total market capitalization of a company as follows-
Total Market Capitalization = 1 Share Value x Total Outstanding Shares
In this way we can say that if one wants to buy a company, then he has to spend money equal to the total market capitalization of that company.
Type of Market Cap
The Securities Exchange Board of India (SEBI) issued a circular on 6 October 2017. Accordingly, SEBI has prescribed three types of caps for all mutual fund schemes.
What is Large Cap
According to the total market capitalization, a company numbered from 1 to 100 is called large cap. Nifty 100 Index The names of these companies can be seen in
Usually the market cap of such companies is more than 10000 crores.
These 100 large cap companies hold 75% of all companies. This means that the beginning 100 large cap companies are really very big companies.
This company is already very big and is at the peak of its growth. In such a situation, it may take a long time for their expansion to double or they are less likely to expand much. Hence their returns are also moderate.
The money invested in it is quite safe; Along with this, the investment risk in them is also low.
Even when the market falls, their stocks fall less, because they are very big companies. Large caps maintain liquidity due to ample number of buyers and sellers. These are less affected by the volatility of the stock market.
Large cap companies are also called blue chip. If we talk about Blue Chip, it means, company listed on NSE from 1 to 100 is Blue Chip.
example of large cap company–
- Ambuja Cement
- Ashok Leyland
- Asian Paints
- Aurobindo Pharma
- avenue supermart
- L&T etc.
What is Mid Cap
nifty 150 mid cap index In the next 150 company names can be seen. This means that in the national stock market, a company numbered 101 to 250 is called a mid cap.
The total market capitalization of midcap is 13.5%. It is the midcap companies that later become large caps. Thus, with more growth opportunities, it has the potential to yield higher returns than large caps.
If the market goes down, then mid cap stocks also go down fast. Therefore, the risk is also higher in comparison to large caps.
If we talk about liquidity and market volatility, then it is less than small cap and more than large cap.
examples of mid cap company–
- Apollo Tires, etc.
What is Small Cap
All companies on the National Stock Exchange from number 251 onwards are called small cap.
to small cap companies nifty 250 index can be seen in. This nseindia.com can be seen on.
The total market share of small caps is around 7%. The return potential is highest for small caps only. Also, the risk or risk is also highest in this.
These stocks are most affected when the market falls. There is also a decline of 25 to 30% in small caps, and the same share price increases in 1 day.
Due to low interest of financial institutions and lack of buyers, there is less liquidity in it.
The fluctuations in the value of their shares are found to be very high. Small cap can become mid cap; And mid cap can become large cap; Or it could be the opposite.
example of small cap company–
- Bombay Dyeing, etc.
(Note- The list of companies is subject to change and is updated from time to time)