There are approximate 4800 listed stocks in our NSE & BSE stock exchanges. So how do you define your investment to be invested in Large Cap, Mid Cap and Small Cap? In October 2017 SEBI took a bold decision and simplified the categorization on how Mutual Fund Company should invest in Large cap, Mid Cap and Small Cap on the basis of Market Capitalization and descending order ie. highest first.
Market capitalization or market cap is calculated by multiplying the number of shares of a company by the current market price of one share. For Eg ABCD company with one lakh shares in share market, selling at Rs. 100 per share, would carry an Rs.100 lakh market cap.
Large caps are described as the first 100 companies in terms of market capitalization. These are well established, stable companies with a steady performance and are usually recommended as a foundation for your investment portfolio. TCS, Reliance, HDFC Bank, Maruti are an example of a large cap /blue chip funds.
Mid-caps include companies from 101st till 250th in terms of market capitalization. These companies are larger and better established than small caps and hence could be less risky. Mid-cap funds could be less vulnerable to market volatility and are generally recommended for investors who want superior returns without high risk. SunTV,EMAMI ,Voltas, PNB Bank are examples of Mid Cap/ Emerging Stocks
Small caps are those companies after the 250th company in terms of market capitalization. These companies are not as established or financially stable as large-cap companies could have significant growth potential. Mutual funds that invest in smallcap companies are called smallcap funds and tend to be volatile and highly risky. These funds are usually recommended for investors who seek aggressive growth and have an appetite for risk. Mahanagar Gas,Finolex Cables , Blue Dart, PVR cinemas, CCD are the examples of Small Cap.
