What Is Market Capitalisation In Stock Markets?

By Author: Vamsi Krishna
Total Articles: 27
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One of the important things you should know about the share market is market capitalisation, or `market cap’ in short. You will keep coming across this term whenever you see the share market live on TV or on web sites. Before you begin to make your foray into the Indian share market, you should know what market capitalisation is and how it affects your investment decisions.

Market capitalisation is the total value of the issued shares of a publicly traded company, or in other words, share price multiplied by the number of shares outstanding. The share market in India comprises large-cap, mid-cap and small-cap stocks. For many people, market capitalisation is an important factor while investing in the share market.

In the Indian share market, some of the largest companies by market capitalisation include Tata Consultancy Services (TCS), ONGC, Reliance, ITC, Coal India, HDFC Bank, State Bank of India, Infosys, HDFC and ICICI Bank. While checking out the share market live, you must have noticed that it is companies like these that make up the Sensex or the Nifty. If you’re interested in investing ...
... in the share market in India, and want relatively safe stocks, then large-cap stocks are your best bet. These are reputed blue-chip companies and much safer than mid-cap or small-cap stocks.

So how exactly is a large-cap stock defined in the Indian share market? Generally, a stock with a market cap of over $10 billion is considered a large-cap stock. A mid-cap stock is between $2 and $10 billion.

Whether you should buy large-cap, mid-cap or small-cap stocks depends on your investment objectives and appetite for risk. The large companies are in their prime and in pretty good health, but their size limits their growth prospects.

A mid-cap stock on the other hand is most likely on the way up and could offer handsome returns in the long term. Imagine the returns you could have made, say, if you had invested in Infosys 20 years ago! But remember that mid-cap stocks may give higher returns, they’re also riskier than established large-cap stocks. That sparkling prospect may turn into a dud in no time if you aren’t careful.

Mid-cap stocks are generally more volatile than the large-cap ones. So you can expect better returns from them when the share market booms, and a bust-up when the market is in decline.

So in the ultimate analysis, market capitalisation is a useful tool for investors. It helps you to decide what stock to buy depending on your investing objectives.

Author Bio :

Ritish Kumar is a finance enthusiast and a keen observer of the Indian share market. In this series of articles, he talks about investing in stock market and staying profitable. share market live, share market in India