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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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.

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