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What is Market Capitalization – Importance of Market capitalization in Stock market

Market Capitalization is the combined evaluation of a company based on its total number of outstanding shares and its current share price. This is calculated by multiplying the company’s total outstanding stocks with its current market price.

What is the importance of MCAP?

Market Capitalization helps the investors in choosing the stock that can meet their diversification criterion and risk. In general a small cap stock  becomes a Midcap as it’s Market capitalization advances. Same way , a midcap gets converted to a large cap as it’s market capital is meeting its Capital.

It also plays an important role in helping the investors identify the risk and returns in the share. Investors always consider market cap along with other financial ratios like OBV, EPS etc.

NSE has a total market capitalization of more than US$2.27 trillion, making it the world’s 11th largest stock exchange as of April 2018.

For example, consider a company with 10 million outstanding shares and the market price of each share is ₹100. Then, the market capitalization of the company will be 10,000,000×100 = ₹100 crore.

Market Cap

There are 3 types of stocks in a company:

  • Large cap : Stocks with market cap of ₹10,000 crore or more.
  • Mid cap : Stocks with market cap between ₹2 crore and ₹10 crore.
  • Small cap : Stocks with market cap less than ₹2 crore.

Know more about Mid and Small cap stocks

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