Market Capitalization, commonly known as Market Cap, is one of the most important and fundamental concepts in stock market investing.
Market Capitalisation is the total market value of company’s outstanding shares.
How is Market Cap Calculated?
Market Cap is calculated by multiplying the current market price of a share with the total number of outstanding equity shares of the company.
Formula:
Market Cap = Current Share Price * Total Outstanding Equity Shares
Example:
ASN Ltd. has 1,00,000 outstanding equity shares, and its market price as on 23rd June 2026 is ₹20.
Market Cap of ASN Ltd. = ₹20* 1,00,000 = ₹20,00,000
So, the Market Cap of ASN Ltd. is ₹20,00,000 (₹2 Million).
What Factors Affect Market Cap?
Market Cap depends on two key factors:
- Current share price of the company’s stock
- Total outstanding equity shares of the company
If either of these changes, the market cap will change too. For example, if a company issues new shares, the outstanding shares increase, which directly affects the market cap — even if the share price stays the same.
How to Calculate Market Cap
- Check the total outstanding equity shares from the company’s Annual Report or exchange filings
- Check the current share price on NSE (National Stock Exchange) or BSE (Bombay Stock Exchange), wherever the company is listed
- Multiply both figures using the formula above
How Does SEBI Classify Companies by Market Cap in India?
The Securities and Exchange Board of India (SEBI) has officially classified listed companies into three categories. This classification is primarily used for mutual fund categorization under SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/114, issued on October 6, 2017.
Category | Ranking by Market Cap | Description | Risk | Return Potential |
Large Cap | 1st to 100th company | Top 100 companies by market cap | Low | Stable |
Mid Cap | 101st to 250th company | Next 150 companies by market cap | Moderate | High |
Small Cap | 251st and beyond | All remaining listed companies | High | Very High |
Why Does Market Cap Matter for Investors?
- Risk assessment: Large Cap companies are generally more stable; Small Cap companies carry higher risk but may offer higher returns over the long term
- Mutual fund selection: SEBI’s classification directly determines which stocks a mutual fund scheme can invest in, helping investors choose funds that match their risk appetite.
- Portfolio diversification: Understanding market cap helps in building a balanced portfolio spread across company sizes
- Category changes: Since AMFI updates the list every six months, a company can move from Small Cap to Mid Cap or Mid Cap to Large Cap — and this directly affects mutual fund portfolios.
Frequently Asked Questions (FAQ)
Q1. What is the full form of SEBI?
SEBI stands for Securities and Exchange Board of India. It is the primary regulatory body that oversees and regulates the Indian securities and stock market.
Q2. Does market cap change every day?
Yes. Since market cap is linked to the current share price, it changes every trading day as stock prices move during market hours. However, SEBI’s category classification is based on a six-month average — so a company’s category does not change daily.
Q3. Which is better — Large Cap or Small Cap?
Neither is universally better. Large Cap stocks offer stability and consistent returns; Small Cap stocks offer higher growth potential but come with higher risk. Your choice should depend on your investment goal and how much risk you are comfortable taking.
Q4. Where can I find a company's outstanding shares?
You can find this in the company’s Annual Report, quarterly results filings on NSE or BSE, or on financial portals like Screener.in or Tickertape.in.
Q5. How often does SEBI update the Large, Mid, and Small Cap list?
AMFI updates and publishes the list every six months, typically effective from February 1 and August 1 each year, based on the average market cap data of the preceding six months.
Q6. Can a company's category change from Large Cap to Mid Cap?
Yes. If a company’s market cap falls due to a drop in share price or other factors, it can move from Large Cap to Mid Cap or even Small Cap in the next AMFI update. For example, in the December 2025 AMFI update, several companies moved between categories.
