7. Large Cap, Mid Cap and Small Cap Stocks: What They Mean in India

Investing Styles and Strategies – 10 posts for beginners | Post 7 of 10

You will hear these terms in every market discussion and on every mutual fund page. They describe the size of a company, measured by its market capitalisation.

What is market capitalisation?

Market capitalisation, or market cap, is the total market value of a company's shares:

Market cap = Share price × Total number of shares

If a company has 10 crore shares trading at ₹500 each, its market cap is ₹5,000 crore.

What is market capitalisation?

How SEBI classifies companies

SEBI defines the categories by ranking all listed companies by full market capitalisation (the list is published by AMFI every six months):

  • Large cap – the top 100 companies.
  • Mid cap – companies ranked 101 to 250.
  • Small cap – companies ranked 251 and below.

Because this is based on ranking, the rupee value that separates the categories changes as the market moves.

SEBI classification

Large cap stocks

These are the biggest and usually best-known companies in the country, many of them in the Nifty 50 and Sensex.

  • Generally more stable and less volatile.
  • Easier to trade because of high liquidity.
  • More likely to pay regular dividends.
  • Growth may be slower because they are already very large.

Mid cap stocks

Mid caps are established companies that still have plenty of room to grow.

  • Can grow faster than large caps.
  • Fall more sharply than large caps in market corrections.
  • Often a balance between stability and growth.

Small cap stocks

Small caps are smaller companies, sometimes leaders in a niche.

  • Highest growth potential, but also the highest risk.
  • Lower liquidity: it can be hard to exit at a fair price, especially in a falling market.
  • Less coverage by analysts, so more homework is required.
  • Prices can swing very sharply in both directions.
The three types compared

Building a balanced mix

Many investors keep large caps as the base of their portfolio and add mid and small caps in smaller amounts depending on their risk appetite and time horizon. Mutual funds also follow these categories: large cap funds, mid cap funds, small cap funds, and flexi-cap or multi-cap funds that invest across all three.

A balanced mix

Key takeaways

  • Market cap = share price × number of shares.
  • In India, large caps are the top 100, mid caps 101–250, small caps 251 onwards.
  • Smaller companies offer more growth potential but carry more risk and less liquidity.

Practise it: try these ideas risk-free with virtual money on GPS-AUTOTRADE India paper trading.

Disclaimer: This post is for education only. It is not investment advice or a recommendation to trade any security. Investments in the securities market are subject to market risks; read all related documents carefully and do your own research.

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