4. Market Capitalisation (Market Cap)
Market Capitalisation = Market Price of the company * Total Outstanding Shares
Market Capitalisation (Market Cap), is the amount of money required to buy out an entire company at its current market price. It is computed as market price per share of the company multiplied by total number of outstanding shares.
Example:
A company which has issued 1 Lakh shares and currently trades at Rs. 20 (Current Market Price) would have Market Cap of Rs. 20 Lakh (1 Lakh * Rs. 20). With change in equity prices, market capitalisation of the companies change continuously.
How to Analyse:
Traded stocks are often categorised by Market Cap.
* Blue-chip stocks represent the largest companies by market cap. Given the large size of their market cap, they attract large set of investors both retail and institutional and enjoy a high level of liquidity. These are also called large cap stocks. As per SEBI for mutual fund categorisation – large cap stocks are those with market cap greater than INR 30,000 + crores.
* Mid cap stocks refer to those companies which enjoy a good level of liquidity but are medium in terms of market cap size. As per SEBI for mutual fund categorisation – Mid cap stocks are those with market cap between INR 10,000 Crores to below INR 30,000 crores.
* Small cap stocks are those stocks that are smaller in size and therefore do not enjoy much liquidity. As per SEBI for mutual fund categorisation – Small cap stocks are those with market cap below INR 10,000 Crores.
