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Market capitalisation means total number of outstanding shares trading in the stock exchange like NSE and BSE, for a company multiplied by price of each share. Market cap is used to estimate valuation of a company.
SEBI categorised company basis below valuation
Since most large cap companies have decades old performance records and are reputed, they are considered safe investments. Mid Cap and Small cap companies may not have consistent results as the large cap, and are considered moderately risky.
When you go to mutual funds and they say we invest in BLUE CHIP Shares mostly they mean these Large Cap stocks. Mid cap and small cap companies while considered risky, still investors have large growth expectations from such companies.
STOCK INVESTMENT STOCK MARKET COURSE VALUE INVESTING FINANCIAL PLANNING GROWTH INVESTING
Small Cap vs Mid Cap vs Large Cap Stocks
In 2017 SEBI defined rules to classify companies according to their market capitalisation.
Listed companies were classified in three different categories
- Large cap
- Midcap and
- Smallcap
Market capitalisation means total number of outstanding shares trading in the stock exchange like NSE and BSE, for a company multiplied by price of each share. Market cap is used to estimate valuation of a company.
SEBI categorised company basis below valuation
| Large Cap | Mid Cap | Small Cap | |
|---|---|---|---|
| Market Cap | Above 20,000 Crores | Between 5,000-20,000 Crores | Below 5,000 Crores |
Since most large cap companies have decades old performance records and are reputed, they are considered safe investments. Mid Cap and Small cap companies may not have consistent results as the large cap, and are considered moderately risky.
When you go to mutual funds and they say we invest in BLUE CHIP Shares mostly they mean these Large Cap stocks. Mid cap and small cap companies while considered risky, still investors have large growth expectations from such companies.
I have always failed to understand this categorization !
Whenever I add a share of a company in stock watch list or stock portfolio, I categorize each share as
Many Small cap and mid cap stocks on the other hand are performing consistently and yet are undervalued. Since many are unknown to the masses, you easily find undervalued stocks in this category.
As for the risk factor I believe that risk is in not knowing what you are doing ! If you can value stocks and understand Stock Market probability of earning, to make estimates of the company growths your investments will perform better.
So called large caps of today were, mid cap or small cap stocks a decade ago !
Whenever I add a share of a company in stock watch list or stock portfolio, I categorize each share as
My personal investment is mostly in mid cap and small cap companies. I have found most large cap companies too popular and over priced to invest most of the times !
- BAD COMPANY - Loss making Companies
- AVERAGE COMPANY - In-consistent profit making Companies
- GOOD COMPANY - Consistent profit making Companies
- GREAT COMPANY - Consistent profit growing Companies
Many Small cap and mid cap stocks on the other hand are performing consistently and yet are undervalued. Since many are unknown to the masses, you easily find undervalued stocks in this category.
As for the risk factor I believe that risk is in not knowing what you are doing ! If you can value stocks and understand Stock Market probability of earning, to make estimates of the company growths your investments will perform better.
So called large caps of today were, mid cap or small cap stocks a decade ago !
STOCK INVESTMENT STOCK MARKET COURSE VALUE INVESTING FINANCIAL PLANNING GROWTH INVESTING
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