Top 10 Companies in India by Market Capitalization - Why Market Cap is Important?

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I was browsing my twitter feed and found this interesting image that tells about - Top 10 Companies in India by Market Capitalization.. In the top list we still have Reliance Industries with market capitalization of Rs. 17+ Mil. Crore. I normally invest in stocks looking at their market capitalization numbers. Normally when people talk about the size of a company, one of the biggest factors to look at is its market capitalization. So before we get any further its imperative to understand - what is market capitalization?

What is Market Capitalization?

In simple terms Market capitalization is the aggregate valuation of the company that is based on its current share price and the total number of outstanding stocks. Or more precisely we can say market capitalization refers to the total value of all a company's shares of stock. Here is the formulae to calculate Market Capitalization of any company.

Market capitalization = (Current market price of 1 share)*(total number of outstanding shares)

So why its necessary to know about a companies market cap, comes the next question. Simply put that market capitalization helps to classify the companies into different types like large-cap, mid-cap, and small-cap companies.

• Large-cap stocks >= Rs. 28,500 crore
• Mid-cap stocks >= Rs 8,500 crore and <= Rs. 28,500 crore
• Small-cap stocks <= Rs 8,500 crore

As seen from the above illustrated numbers you can easily classify a company if its a large-cap, mid-cap, or a small-cap company. I feel confident investing in a large-cap company as opposed to investing a small-cap company. Chances are very unlikely that the large-cap company would become bankrupt as opposed to a company which falls under small-cap. Also, I have personally noticed that large-cap companies pays dividends/Bonuses at least once a year but if you are lucky and have invested in a good large cap company that you may even get dividends/Bonuses twice a year as well. Finally now that you know what Market Capitalization is a person can now easily identify - Which company is bigger?. Lets take an example; here are the share price of two companies from the banking sector.

1. HDFC BANK - Rs. 8,33,656 crore
2. ICICI BANK - Rs. 6,33,171 crore

Therefore, the market capitalization of HDFC BANK is Rs 8,33,656 Crores while the market capitalization of ICICI Bank is Rs. 6,33,171 Crores. Therefore, HDFC BANK is a bigger company/bank compared to ICICI BANK. A final note as mentioned above a company with a high market cap is generally matured and considered to be a large-cap company. Whereas companies with small market capitalization are comparatively riskier and volatile. Therefore investing in high market cap companies can be considered good for investors. The same logic you can apply while investing in Crypto markets... BTC has the highest market capitalization so investing in BTC is safer as opposed to investing in a coin whose market cap is the lowest or have recently pumped due to sudden bulk buying from whales.. be cautious about these market fluctuations and always look into Market Capitalization of a company before investing in iT... cheers...

Top 10 Companies in India by Market Capitalization..

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