What is Market Capitalization? Explained with Indian Examples

Market Capitalization is commonly called “Market cap” and represents the total value of a company on a stock exchange. Its price is determined by the supply and demand of its shares. Market capitalization is calculated by multiplying the current share price by the outstanding shares.

Types of Market Capitalization

Here are the types of market capitalization:

Small-Cap Companies: Their market cap of less than INR 10,000 crore. They are emerging businesses with higher risk. For example:

Vishnu Chemicals	Below INR 5,000 crore
Tanla Platforms	Under INR 9,000 crore

Large-Cap Companies: Their market cap of INR 50,000 crore and above. They are stable and well-established, with lower risk. For example:

Reliance Industries	In 2024, its market cap is over INR 18 lakh crore.
Tata Consultancy Services (TCS)	With a market cap of over INR 13 lakh crore market cap

Mid-Cap Companies: Their market cap of INR 10,000 crore to INR 50,000 crore. They have high growth potential and have moderate risk. For example:

Apollo Hospitals	Around INR 55,000 crore
Aarti Industries	Around INR 22,000 crore

Why is Market Capitalization Important?

The reason behind the importance of the market cap:

Portfolio diversification: where knowing the market cap helps investor diversify their portfolio across different segments, by balancing the risk and return.
Investment Risk Assessment: The large-cap companies are normally less volatile. This making them safer for the long-term investor. And small-cap stocks offer the highest return, but they have higher risk.
Benchmark for Indices: The indices like NIFTY 50 and BSE Sensex are based on the market cap of companies, which includes only large and mid-cap firms.

How to Calculate the Capitalization?

The basic formula is,

Market capitalization = Share Price X Outstanding Share

For example,

If ABC company has 4 crore outstanding shares, and each share is priced at INR 400:

4,00,00,000 X 400 = 16,00,00,00,000 (1,600 Crore)

Let’s take another example, if an XYZ company has 50,000 shares, and each is priced at INR 500:

50,000 X 500 = 2,50,00,000 (2.5 Crore)

Conclusion

In summary, the market cap is a powerful metric that helps the investor understand the size and potential of a company. Before investing in large-cap, mid-cap, or small-cap companies, you should understand their market cap, as it plays a key role in your journey of investment. We hope this blog on what is Market Capitalization has been helpful to you.

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Saniya

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