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Sunday, July 7, 2024

Market Capitalisation Categorisation & MFs

 Market capitalisation (market cap) represents the total value of a company's outstanding shares, calculated by multiplying the current market price per share by the total number of outstanding shares

Market cap, or market capitalization, is one way of measuring a company's total value, based on outstanding shares of stock. Market cap is also used to compare and categorize the size of companies among investors and analysts.

  • Large Cap – Large cap companies are usually stable, reputable and well-established businesses that have a significant market share. They have market caps of INR 84300 crore or more. Due to the low volatility in comparison with mid-cap and small-cap stocks, the risk associated with investing in the stocks of large-cap companies is very low. However, the downside to this is that the growth potential of these stocks is also low.
  • Mid Cap – Mid-cap companies have a market cap ranging from INR 27600 crore to INR 84300 crore. While the risk of investing in these companies is higher than investing in large-cap companies owing to the increased volatility of their stocks, they tend to have a higher growth potential.
  • Small Cap – Small-cap companies operate at a smaller scale than large-cap and mid-cap companies. Consequently, their market cap is also lower (less than INR 27600 crore). Stocks belonging to these companies have considerable growth potential, but are also extremely volatile. Thus, they are often the riskiest options for investors.

 

These class of shares have significant differences in risk & return and related  parameters.

Comparison of different market cap classes

 

Particulars

Large-cap

Mid-cap

Small-cap

Mkt capitalization Limit

Top 100

101-250

251 onwards

Risk Profile

Low

High

Very high

Liquidity

High

Moderate

Low

Volatility

Low

High

Very high

Returns

Average

High

Very high

Growth

Reasonable

High

Very high


According to the SEBI circular no: SEBI/HO/IMD/DF3/CIR/P/2017/114dated October 6, 2017 on Categorization and Rationalization of Mutual Fund Schemes, schemes are broadly classified as:

a. Equity Schemes

b. Debt Schemes

c. Hybrid Schemes

d. Solution Oriented Schemes

e. Other Schemes


Further Equity shares are classified into Large , Mid and Small cap based on market capitalisation for uniformity in the Mutual Funds schemes that will enable easy comparison by investing public:

a. Large Cap: 1 st -100 th company in terms of full market capitalization

b. Mid Cap: 101 st -250th company in terms of full market capitalization

c. Small Cap: 251st company onwards in terms of full market capitalization

AMFI used to publish the market capitalization limits for these classes periodically as these are moving target with passage of time.

Movement of Market Capitalization Floor Limit

 Rs Crores

Period

Large-cap

Mid-cap

Small-cap

Jan-June 2024

84, 300

27, 600

Below 27600

July-Dec 2023

67, 017

21, 994

Below 21994

Jan-Jun 2023

49, 687

17, 409

Below 17409

July-Dec 2022

48, 898

16, 813

Below 16813

Jan-June 2022

47, 461

16, 441

Below 16441


It is always advisable to go through Scheme Information Document(SID) and Statement of Additional Information(SAI) given in the Offer Document(OD) brought out by the Asset Management company(AMC) to understand the risk characteristics in detail. 


Happy Investing

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1. Why Rich become more Rich and poor Middle class remain poor?      

2. SIP- The all weather investment approach                  




Disclaimer:

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of future performance of the schemes. The Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the availability and adequacy of distributable surplus. Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in the scheme.

While all efforts have been taken to make this web site as authentic as possible, please refer to the print versions, notified Gazette copies of Acts/Rules/Regulations for authentic version or for use before any authority. Author will not be responsible for any loss to any person/entity caused by any short-coming, defect or inaccuracy inadvertently or otherwise crept in this blog, solutionsxgen.blogspot.com



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