Market Capitalisation: Definition & Formula

Key takeaways 
 

• Market Capitalisation is the total value of a company measured by its shares and total price. 
   
• If you want to calculate the market Capitalisation of any company, you must multiply the total number of shares by its price. 
   
• There are three types of companies according to their size: large-cap, mid-cap, and small-cap.

Bonus point - Indian markets saw a $639 billion erosion in Q1 2026, which is the biggest since COVID-19. Also, Sensex is down 10.8% and Nifty 9.5%.

You and I know that Apple is one of the biggest companies in the world. In India, Apple is considered a prestigious brand. But how do we determine how big this company is? If we want to know the answer to this question, we need to understand the market Capitalisation or market cap.

Example 

Market Capitalisation Of Apple

Current Share Price: ₹23,367

Shares Outstanding: ~ ₹1,35,864 crore

Market Capitalisation  Of Apple ( March 16, 2026) = ₹23,367 ₹1,35,864 crore 

          = ₹3,17,47,34,088 crore

What is Market capitalisation?

Market capitalisation is simply the multiplication of the total number of that company's shares and the price of that share. For example, if an investor wants to buy the Apple company, I know this is a little impossible, but I'm just taking an example because I can't even think how many countries' GDP is equal to the apple's value. So, let's suppose. That Investor first has to know about Apple's Total share and price of that share, and then multiply them. This calculation will give the market cap of Apple. Shares of a company never change, but the price of shares changes every minute. That's why companies' market caps change every day. 

Market Capitalisation  formula =

Share Price × Total Shares Outstanding

Market cap gives us insight into the company's size. Generally, large market cap companies are well-established and stable companies. And that's why conservative investors choose these companies. Whereas small Market cap companies are risky, they present large growth opportunities to the investors. But we need to understand that it doesn't show true intrinsic value. Because market cap can be impacted by investors’ sentiments too. 

Types of market Capitalisation 

There are mainly three types of market cap. Large-cap, mid-cap, small-cap.

The companies which are listed in the stock market are ranked based on their market cap. 

1. Large-cap

Those companies which ranked from 1 to 100 according to the market cap are large-cap companies. Large-cap companies should have a minimum market cap of ₹1,05,000 crore.

2. Mid-cap companies 

Those companies which ranked from 101-250 according to the market cap are mid-cap companies. Mid-cap companies market cap ranges from between ₹34,700 crore and ₹1,05,000 crore.

3. Small-cap

The rest of the companies ranked above 250 are small-cap companies. Those companies with a market cap lower than ₹34,700 crore are small-cap companies.

Here, I'm giving a small table which will help you understand which companies are in which category. 

When I go for any exam, I always prepare according to the syllabus, and everyone does the same. Similarly, when you have to work with a company or invest in it, you should know about its market capitalisation and size. 

Why is market Capitalisation  important?

Market Capitalisation  becomes important for the evolution of stocks and for making better investment decisions. It makes investors understand the company's worth. It assesses companies’ performance, growth, and industry standing and presents risk and return possibilities. Those companies with large-cap stocks are not risky but they do not give much return. Small-cap companies are risky, but give more returns. Also, market Capitalisation  is a universally accepted method for determining the size of a company, so it becomes important.

Conclusion 

In the end of this article, I want to say that every company is different. Market Capitalisation is important for investors. They watch stocks and evaluate the investment in it. It gives them insight into company size. No matter if you are investing in large-cap, mid-cap, or small-cap companies. Understanding market capitalisation becomes important for building a stable portfolio. Before investing, you should always consult an advisor.

FAQs 

What exactly is Market Cap, and why does it matter?

Market cap is the total value of a company's shares on the stock market. The formula for market cap is the total value of shares multiplied by the price of shares. By knowing the market cap, you can understand the company size and compared to the companies. 

What is the difference between Market Cap and Equity Value?

Market cap is the value of a company's share, and equity value is the addition of market cap and capital after deduction of debt. Market cap is just the share price and its value, whereas equity value is the whole financial part of the company. 

Why is Apple's market cap so high compared to its revenue?

Apple's market cap is so high compared to its revenue because shareholders don't only look at current revenue. They always go for the possibility of growth, strong brand value, high profitability, and a loyal customer base. 

Small Cap vs Mid Cap vs Large Cap: Which is better for the long term?

Small-cap means the company which has stable records, lower risk, and steady returns. In a mid-cap company, growth is balanced and risk is moderate. Also, in small cap growth potential is high and risk is high too.