What Is Market Cap? Meaning, Types & How To Analyse Stocks?

Market capitalisation is often shortened to market cap. It refers to the total value of a company’s outstanding shares. You can calculate it by using the following formula:

Total outstanding shares × Current share price = Market Cap

Let’s understand this in simple terms. Suppose a listed company has 8 crore shares in the market, each priced at ₹200. So, this company’s market cap is:

₹200 × 8 crore = ₹1,600 crore

This figure gives you a rough idea of the company’s worth in the eyes of the market. However, it is not the same as the company’s actual revenue, profits, or assets.

It helps investors compare company sizes, understand risks, and make better investment decisions. This blog will help you understand market cap in detail. Also, it will help you understand its types and how to use it while analysing a stock.

Why Does Market Cap Matter To Investors?

Market Cap can help you in:

• Measuring the size of a company.
   
• Categorising stocks into groups of small, mid, or large.
   
• Understanding the company’s risk level.
   
• Comparing companies within the same sector.
   
• Tracking how the market views the company’s future potential.
   

It is one of the first metrics that financial analysts look at. However, it should always be used along with other ratios like price-to-earnings or return on equity.

For example, two companies might have the same market cap of ₹5,000 crore. However, one could have a much higher P/E ratio. This indicates higher investor expectations or possible overvaluation.

How To Calculate Market Capitalisation?

The basic formula to calculate is:

Market Cap = Share Price × Number of Outstanding Shares

Suppose that company XYZ has:

• 6 crore shares in circulation
• Share price of ₹120
   

Then, the market cap is: ₹120 × 6 crore = ₹720 crore.

This is a dynamic number that changes as the share price goes up or down. You can check a company’s real-time updates about market cap on stock exchanges and trading platforms.

Example: 
 

The above-mentioned table shows you the sample market cap calculations.

Types Of Companies Based On Market Cap

Companies listed on the stock exchange are divided into different groups depending on their market capitalisation. These are:

1. Large-Cap Companies

Their market cap is ₹20,000 crore or more. These companies are usually leaders in their industries, well-known, and financially strong. The value of their shares remains relatively stable. 

• Example: Apple, Microsoft, and Amazon

2. Mid-Cap Companies

Generally, their market cap is between ₹20,000 crore and ₹5,000 crore. They offer a balance between growth and stability. It is ideal for you if you are seeking a balanced level of risk.

• Example: Metropolis Healthcare, Castrol India, and LIC Housing Finance

3. Small-Cap Companies

Generally, its market cap is less than ₹5000 crore. They have high-growth potential. But it also has a high risk. Usually, they include younger or expanding companies.

• Example: Retracable Technologies Inc. or Fate Therapeutics Inc.

4. Micro-Cap Companies

Their market cap is between ₹100 crore and ₹500 crore. They are least stable, highly speculative, and have limited public information. These appeal to investors who are willing to take on higher risk.

• Example: Ceragon Networks and IBEX

Not all companies are the same size. The following table shows you how they are categorised by market cap:
 

The above-mentioned table provides a summary of the types of companies based on market cap.

How To Use Market Cap When Analysing A Stock?

The following are a few ways to use market capitalisation as part of your stock research:

1. Compare Size

In terms of market cap, mid-cap companies are typically smaller than large-cap ones. However, they might grow faster. With the help of the market cap, you can measure size quickly.

2. Identify Investment Style

You can identify investment styles as:

• Conservative investors may choose large-cap stocks.
• Moderate investors may blend large- and mid-caps.
• Aggressive investors often pick small- or micro-cap stocks.
   

3. Understand Risk

Larger companies are supposed to be less risky. Smaller companies may deliver higher returns but carry greater risk.

4. Balance Your Portfolio

It is usually wise to invest in companies across different market cap levels if you want to balance stability and growth.

Example: 
 

The above-mentioned table shows you a sample portfolio based on risk preference.

Recent Market Cap News 

To understand how market capitalisation works in real life, let’s look at current events:

1. In July 2025, India Today’s report listed the top 7 companies by market cap:
 

This shows the dominance of these companies in terms of investor value. Overall, market sentiment remains highly positive towards AI-driven and cloud-focused businesses like Nvidia, Microsoft, and Amazon. Energy giant Saudi Aramco also commands investor trust because of its oil strength, though there is caution around global price fluctuations.

2. In July 2025, the value of shares of PC Jeweller fell nearly 4%, pushing its market cap below ₹11,000 crore. This decline reflects weak investor sentiment, as shareholders appeared concerned about the company’s growth prospects and short-term financial performance.

3. According to a report by Rediff, around 8 top-listed firms lost a combined ₹2.07 lakh crore in market cap last week. Such a sharp fall indicates cautious investor sentiment, as market participants reacted to concerns over earnings, global cues, and sector-specific pressures.

4. The Times of India highlighted a major event where shareholders lost ₹1.4 lakh crore in total market cap due to the Jane Street ban and F&O disruptions. This sudden decline of value reflected nervous investor sentiment, as participants grew wary of market stability and regulatory actions.

5. As per a report from NDTV, Nvidia became the world’s first listed firm to cross a $4 trillion market cap, driven by AI demand. This reflects positive investor sentiment, as markets continue to reward companies leading in artificial intelligence and semiconductor innovation.

6. The total market cap of cryptocurrencies has touched $3.8 trillion and may exceed the United Kingdom’s GDP soon. This growth highlights strong investor optimism, as digital assets continue to gain wider acceptance despite volatility and regulatory challenges.

7. As per a report by Fortune India, Bitcoin crossed $121,000 and became the world’s fifth-largest asset by market cap. This achievement signals strong positive sentiment, as investors view Bitcoin as both a store of value and a hedge against traditional financial risks.

Conclusion

You might have understood by now that market cap gives you a quick overview of the size of the company in the stock market. It helps you as an investor compare firms, assess risk levels, and follow market movements.

However, you should not use it alone when making investment decisions. You should also review earnings, liabilities, profit growth, and sector position.

Building a portfolio that includes companies from various market cap categories can help reduce risk and improve potential returns. 

FAQs

1. Can a company move between large-cap and mid-cap?

Yes, changes in share price or share count can shift a company’s category over time.

2. What role does public sentiment play in market cap?

A big news, hype, or panic can quickly inflate or deflate the share price.

3. Does higher market cap mean better dividends?

Not always, some large firms reinvest profits instead of distributing them.

4. Is market cap useful for SIP investors?

Yes, it helps in choosing funds based on your risk and return alignment.

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