Market Cap

Market capitalisation (market cap) is the total value of all outstanding shares of a publicly traded company. It is the simplest measure of a company's size and is calculated by multiplying the current share price by the total number of shares outstanding.

For example, if Reliance Industries has approximately 676 crore shares outstanding and the stock trades at ₹2,500, the market cap is ₹2,500 × 676 crore = approximately ₹16,90,000 crore (around $200 billion). This makes Reliance one of the largest companies in India and among the top 100 globally.

SEBI uses market cap to classify stocks into three tiers: Large Cap (rank 1–100), Mid Cap (rank 101–250), and small-cap (rank 251+). This classification drives the investment universe for mutual fund categories — a large-cap fund must invest at least 80% in large-cap stocks, and a mid-cap fund must invest at least 65% in mid-cap stocks. The Association of Mutual Funds in India (AMFI) publishes the updated classification list every six months.

There are two variations: full market cap (share price × total shares) and free-float market cap (share price × publicly tradeable shares, excluding promoter holdings, government holdings, and locked-in shares). The Nifty 50 and Sensex use free-float market cap for index construction. A company where promoters hold 75% of shares has only 25% free float — meaning its index weight is based on that 25%.

Market cap alone does not tell you whether a stock is cheap or expensive. A ₹20,00,000 crore market cap company could be overvalued if its earnings do not justify the price, while a ₹5,000 crore company could be undervalued. Valuation ratios like P/E, P/B, and EV/EBITDA provide the context that raw market cap does not.