_All of you have heard that midcap has given more returns than large cap and small
cap giving
the best!!! What exactly are these terms?? 🤔 Whats importance? Lets figure this out_
✨ _*Meaning*_
📍Market capitalization is one of the most effective ways of evaluating the
value of a company. It is crucial for readers to understand that this evaluation
of a company’s value is done based on a company’s stocks.
📍Essentially, this is defined by the total market value of the outstanding
shares of a company. This simple fact also means that publicly owned
companies are the only ones that can be evaluated by this method of
evaluation.
✨ _Formula_
📍 MC = N X P
Where,
MC stands for Market Capital,
N for the number of outstanding shares,
And P is the closing price of each share of the concerned company.
✨ _Types of companies by Market Capitalisation_
📍 *_Large Caps_*
👉🏻 Having market cap of From Rs.7,000 crore up to Rs.20,000 crore
👉🏻These are some of the most stable groups of companies in the market.
Consequently, investing in these companies is the least risky option. However,
another important factor to keep in mind is that since these are stable
companies, the return from these companies is comparatively low.
👉🏻Typically, these companies have reached the pinnacle of their growth, and
as a result, there is a lesser chance of any drastic change in stock prices.
👉🏻 However, the low risk accompanied by less aggressive growth makes
investment in these stocks a conservative
📍 *_Mid Cap_*
👉🏻 From Rs.500 crore up to Rs.7,000 crore
👉🏻Companies which have had a certain growth and are somewhat stable; and
yet have immense potential of growth, come under this group of evaluation
by market capitalization. These stocks indicate that a company is established
to a certain extent in its industry, along with the promise of further growth.
👉🏻While investing in these companies can still be risky since they are not
established in their industry, the risk in investing in their stocks is much less
than that of the next group of companies. Subsequently, the return on them
can be potentially higher than those of large-cap stocks.
📍 *_Small Cap_*
👉🏻 Up to Rs.500 crore
👉🏻 Constituting companies which have the least market cap are the riskiest of
all stocks. These are companies who are budding and are yet to establish
themselves in their industry. This makes them highly risky.
👉🏻Success can sky-rocket their stock prices while failure can lead to a major
loss for their shareholders. These are the most aggressive investment options.
✨ *_Importance_*
1) Affects the Index
2)Helps in Comparison
3) Balanced Portfolio
Investors should maintain a balanced portfolio to ensure they do not run the risk of any major
loss. This includes opting to invest in a few top companies by market cap, along with the high-risk
investments in developing enterprises.
Vinit Shah
SRO0721705
