What is Market Cap?
A ₹50 share is not necessarily smaller than a ₹5,000 share. Market capitalisation is the right way to measure the true size of a company — and it changes how you think about investing.
Key takeaways
Why share price alone is misleading
If someone asked you 'which is bigger — a ₹5,000 share or a ₹50 share?' — the honest answer is: you cannot tell just from the price. A ₹50 share could belong to a massive company, and a ₹5,000 share could belong to a small one. The right way to measure the size of a company is Market Capitalisation — or simply Market Cap.
The formula
Market Cap = Share Price × Total Number of Shares. Company A has 1 crore shares at ₹500 each — market cap is ₹500 crore. Company B has 100 crore shares at ₹50 each — market cap is ₹5,000 crore. Company B is 10 times larger even though its share price is 10 times smaller. Share price alone tells you nothing about the size of a business.
Large cap companies
SEBI classifies the top 100 companies by market cap on Indian exchanges as large cap. These are well-established, stable businesses like Reliance, TCS, HDFC Bank, and Infosys. They are considered lower risk because they have long track records, strong financials, and are less likely to collapse suddenly. Large cap mutual funds invest primarily in these companies.
Mid cap and small cap companies
Mid cap companies rank between 101st and 250th by market cap. These are growing companies with more potential upside than large caps — but also more risk. Small cap companies are ranked 251st and beyond. These are smaller, younger companies. They can grow very fast — but they can also fall sharply. Higher potential reward always comes with higher risk.
Why does this matter for your investments?
When you invest in a mutual fund, the fund is categorised by where it invests — large cap fund, mid cap fund, small cap fund, or a combination. Understanding market cap helps you understand what kind of companies your money is going into and what level of risk you are taking. A large cap fund is generally safer and more stable. A small cap fund can grow faster but can also fall harder.