Metric Explainer: Market Capitalisation
The total market value of all shares combined — how much the stock market thinks the entire company is worth. "Market Cap matlab stock market ke hisaab se pu...
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Simple definition
The total market value of all shares combined — how much the stock market thinks the entire company is worth.
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"Market Cap matlab stock market ke hisaab se puri company ki kimat kitni hai. Share price × total shares = Market Cap."
Why it matters
- Size classification — SEBI uses market cap to classify Large-cap, Mid-cap, Small-cap
- Enterprise Value component — EV = MCap + Debt − Cash
- Index weighting — Nifty 50, Sensex weight companies by free-float market cap
- Liquidity indicator — larger market cap usually means more liquid (easier to buy/sell)
Formula
Market Cap = Current Share Price × Total Shares Outstanding
SEBI size classification (as of 2024)
| Category | Market Cap rank | Approximate range |
|---|---|---|
| Large-cap | Top 100 | > ₹60,000 Cr |
| Mid-cap | 101–250 | ₹15,000–60,000 Cr |
| Small-cap | 251+ | < ₹15,000 Cr |
| Micro-cap | Unranked | < ₹2,000 Cr |
Free-float market cap
Free-Float MCap = Price × (Total Shares − Promoter/Locked Shares)
Free-float MCap is used for index weighting. A company with 75% promoter holding has only 25% free float.
Common mistakes
Mistakes to avoid
- Market cap ≠ company worth — Market cap reflects sentiment, not intrinsic value. It can be overvalued or undervalued
- Comparing market caps across sectors — ₹1L Cr IT company and ₹1L Cr bank are very different businesses
- Market cap changes daily — It's just Price × Shares. Don't read too much into daily fluctuations
- Ignoring EV — For companies with significant debt, market cap understates the true cost of owning the business
Red flags
- Market cap exploding without proportional earnings growth — bubble territory
- Market cap < book value (PB < 1) — market sees problems ahead
- Tiny market cap (< ₹500 Cr) with poor liquidity — manipulation risk
Related metrics
- Enterprise Value — MCap + Debt − Cash (total business value)
- PE Ratio — MCap / PAT = PE (valuation multiple)
- Book Value — Accounting value vs market value comparison