Market capitalisation explained: large-cap, mid-cap and small-cap
Market cap is a company’s total value on the stock market. Here is how it is calculated and how SEBI classifies large, mid and small caps.
Market capitalisation (or market cap) is the total value the stock market places on a company. It is one of the simplest ways to compare the size of listed companies.
How it is calculated
Market cap = share price × total number of shares
If a company has 50 crore shares and each trades at ₹400, its market cap is 50 crore × ₹400 = ₹20,000 crore. Because the share price changes every second during market hours, market cap changes too.
Market cap is not the same as how much money the company has, or what it would cost to buy the whole business (that would also depend on its debt and cash). It is simply the market value of its shares.
Large-cap, mid-cap and small-cap in India
In India, these labels have a precise meaning for mutual funds. Under SEBI's rules, all listed companies are ranked by their full market capitalisation:
| Category | Rank by market cap |
|---|---|
| Large-cap | 1st to 100th company |
| Mid-cap | 101st to 250th company |
| Small-cap | 251st company onwards |
AMFI publishes the updated list every six months, so a company can move between categories as its market value changes. A "large-cap fund" must invest most of its money in the top 100 companies, a "mid-cap fund" in companies ranked 101–250, and so on.
How the categories tend to behave
These are general tendencies, not rules:
- Large-caps are usually well-established companies. Their share prices tend to be less volatile, and their shares are easy to buy and sell.
- Mid-caps are often growing businesses. They can grow faster than large companies, but their prices usually swing more.
- Small-caps can be young or niche businesses. They can rise or fall very sharply, and some are thinly traded, which means it can be harder to sell quickly at a fair price.
Free-float market cap
Indices such as the Nifty 50 and Sensex use free-float market cap, which counts only the shares available for public trading and leaves out, for example, promoter holdings. This gives a better picture of how much of a company ordinary investors can actually trade.
Common mistakes
- Thinking a low share price means a small company. Share price alone says nothing about size – a ₹50 share can belong to a bigger company than a ₹5,000 share, depending on how many shares exist.
- Assuming large-cap means safe. Large companies can also fall sharply, and individual businesses can decline.
Key takeaways
- Market cap = share price × number of shares.
- In India, large-cap means the top 100 companies by market cap, mid-cap 101–250, small-cap 251 onwards.
- Smaller companies tend to be more volatile; size alone doesn't make an investment good or bad.