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Share Market Capitalisation

Posted on 2019-08-25 in KNOWLEDGE PORTAL

Whenever you're planning to invest in shares of any company, it's vital to know the market capitalisation of that company. This will help in designing long-term financial objectives, understanding return potential, managing risks, and creating a balanced portfolio of stocks.




So what exactly is market capitalisation.




Market capitalisation, also referred as market caps, is the total value of a company derived by multiplying the total number of outstanding shares by the current price of each share. The result indicates the overall market value of the company and its size.




For example: 




If ABC company has 10,000 outstanding shares, and the price of each share is Rs. 10, then its market capitalisation will be Rs. 1,00,000 (10,000 x 10). For investors,  market cap serves as a benchmark to determine the company's value, its future prospects, and to choose stocks for investment. However, know that the company's market captilisation changes with the price of shares.




Company ABC

Company XYZ

Price Per Stock Rs. 100

Price Per Stock Rs. 200

No. of Shares – 50000

No. of Shares – 30000

Market Capitalisation  = 5000000

Market Capitalisation  = 6000000








 In India, stocks are generally classified into three types: Large Caps, Mid Caps, and Small Caps.




 Large Cap – Companies falling into this class have a market cap above 20,000 crores. This type of market cap is generally enjoyed by well-established businesses whose products and services are considered best and preferred by the public.




 Mid Cap -  Companies with a market cap in between 5000 to 20,000 crores belong to this class. These companies may not be an industry leader, but have the potential to become one. 




Small Cap – Companies whose market value is less than 5000 crores are in this bracket. That's why investing in small cap stocks is considered risky.




The selection of a company to invest depends totally on individual preferences. If you are looking for a long-term investment, select large-cap companies to invest. On the other hand, if you are looking for high profits and quick returns, then you should invest in small or mid-cap companies.








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