Market capitalisation
Market capitalisation is the total value the stock market puts on a company: its share price multiplied by the number of shares it has issued.
Market cap = Share price × Total number of shares
What it is
Market capitalisation, or market cap, tells you what the whole company is worth at today’s share price. If you wanted to buy every single share at the current price, this is roughly what it would cost.
It changes every second the market is open, because the share price changes. The number of shares changes only when the company issues new shares, buys some back, or does a split or bonus.
How to read it
In India, companies are commonly grouped into large cap, mid cap and small cap by their market cap rank. Large caps are the biggest, most traded companies. Small caps are younger or smaller businesses whose prices tend to swing much more.
Market cap is also how you compare company size fairly. A ₹50 share is not “cheaper” than a ₹5,000 share. What matters is the total value and what you get for it in profit, assets and growth.
What it does not tell you
Market cap is a price, not a measure of quality. A big market cap can sit on top of a weak business, and a small one can belong to a well-run company the market has not noticed yet.
It also ignores debt. Two companies with the same market cap can be very different if one owes ₹5,000 crore and the other owes nothing. That is why market cap is usually read next to profit (P/E), book value (P/B) and debt.
Working out market cap
A company has 20 crore shares and the share price is ₹450. Market cap = ₹450 × 20 crore = ₹9,000 crore. If the price rises to ₹500 the next month, the market cap becomes ₹10,000 crore, even though nothing in the business has changed.
Common mistakes
- Thinking a low share price means a small or cheap company. Only market cap tells you size.
- Treating a large cap as automatically safe. Large companies can fall a lot too.
- Comparing market cap with no look at profit, debt or growth.
Company A trades at ₹100 with 50 crore shares. Company B trades at ₹2,000 with 1 crore shares. Which is bigger by market cap?
- Company A, at ₹5,000 crore
- Company B, because its share price is higher
- They are the same size
Show the answer
Company A, at ₹5,000 crore. A is ₹100 × 50 crore = ₹5,000 crore. B is ₹2,000 × 1 crore = ₹2,000 crore. The share price alone tells you nothing about size.
Common questions
What is market capitalisation in simple words?
It is the total value of all of a company’s shares at today’s price. Multiply the share price by the number of shares and you have it.
Is a higher market cap better?
Not by itself. A higher market cap means the company is bigger in the market’s eyes, not that it is a better business or a better buy.
What is the difference between large cap, mid cap and small cap?
They are size groups based on market cap ranking. Large caps are the biggest companies, mid caps come next, and small caps are the rest. Smaller companies usually move more sharply in both directions.
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