Market capitalisation (market cap) is the total market value of a company. Its current share price multiplied by the total number of shares it has issued. Ranking all listed companies by this size is how the market sorts them into large-cap, mid-cap and small-cap stocks.
How is market cap calculated?
Just multiply two numbers:
Market cap = share price × total number of shares
Suppose Anjali is comparing two fictional companies. Kaveri Motors trades at ₹2,500 and has 40 crore shares, so its market cap is ₹1,00,000 crore. Sundar Textiles trades at a higher price of ₹4,000 but has only 50 lakh shares, so its market cap is just ₹2,000 crore.
Notice the trap Anjali avoided: the ₹4,000 stock is not the bigger company. Share price alone says nothing about size. A company can split its shares into many cheap ones or keep a few expensive ones. Market cap is the honest size measure, which is why index weights and category rankings use it, not the price per share.
Because the share price changes every trading day, market cap changes with it.
Who decides what counts as large-, mid- or small-cap?
In India this is not left to opinion. The market regulator, the Securities and Exchange Board of India (SEBI), defines the buckets by rank, and the Association of Mutual Funds in India (AMFI) publishes the official list periodically:
| Category | Rank by market cap | Rough character |
|---|---|---|
| Large-cap | 1st to 100th company | Big, established, widely tracked names |
| Mid-cap | 101st to 250th company | Established but still growing businesses |
| Small-cap | 251st company onwards | Smaller, younger or niche businesses |
Because the buckets are ranks, not fixed rupee amounts, companies migrate between them as prices move. A fast-growing small-cap can become a mid-cap in the next list, and vice versa.
Why does the category matter to me?
The cap category is a quick proxy for how a stock tends to behave:
- Large-caps are usually the most liquid. Heavily traded, tight spreads, prices that are hard for any single participant to push around.
- Mid-caps sit in between: decent liquidity, but sharper price swings than large-caps in both directions.
- Small-caps can move dramatically on little news, may trade thinly, and some come under exchange surveillance frameworks when moves get extreme. The category holds both future giants and companies that quietly fade away.
Mutual fund names follow the same buckets (a "large-cap fund" must invest mainly in those top-ranked companies) so understanding the categories helps you read fund labels too.
You will also hear "free-float market cap", which counts only shares actually available for public trading. Indices like the Nifty 50 use this version. See what is a market index like Nifty 50 or Sensex.
Things to keep in mind
- Compare companies by market cap, never by share price. A ₹50 stock can belong to a far bigger company than a ₹5,000 stock.
- Cap categories are ranks that get refreshed periodically, so a stock's category can change over time.
- Smaller caps generally mean bigger swings and thinner trading. Check liquidity before placing large orders.
- Category describes size, not quality: large-caps can fall and small-caps can stagnate; no bucket guarantees anything.
Read next
What is free float, and why does it matter? — Not every share is actually available to trade. Free float is the part that is.