Market capitalisation, or market cap, is the total market value of a company's shares. It is calculated by multiplying the current share price by the total number of shares outstanding. Market cap tells you how large a company is in the eyes of the stock market.
What market capitalisation is
A share price on its own says little about a company's size. A company with a share price of ₹50 can be far larger than one with a share price of ₹5,000, if it has many more shares. Market cap solves this by looking at the value of all the shares together.
Formula: Market cap = Current share price × Total shares outstanding.
How it works in India
In India, market cap is usually expressed in crore rupees. Mutual fund rules classify listed companies by market cap rank: the top 100 companies are large-cap, the next 150 are mid-cap, and the rest are small-cap. This list is updated periodically. Because share prices change every day, market cap changes every day too.
Some indices use free-float market cap, which counts only the shares available for public trading and leaves out shares held by promoters and certain other holders.
A simple example
Company A has 50 crore shares trading at ₹200: its market cap is ₹10,000 crore. Company B has 2 crore shares trading at ₹2,000: its market cap is ₹4,000 crore. Even though Company B's share price is ten times higher, Company A is the larger company by market value.
Why it matters for investors
Market cap helps you compare company size, understand risk (smaller companies can grow faster but are often more volatile and less liquid), and compare like with like, since a very large company and a very small one behave differently.
Market cap and enterprise value
Market cap measures only the value of a company's shares. Analysts sometimes use enterprise value (EV) to get a fuller picture of what it would cost to own the whole business. Enterprise value starts with market cap, adds the company's debt and subtracts its cash. Two companies with the same market cap can have very different enterprise values if one carries heavy debt and the other holds a lot of cash. For quick size comparisons, market cap is usually enough; for deeper analysis, enterprise value adds useful context.
Common misconceptions
"A high share price means a big company." Size depends on price multiplied by the number of shares, not price alone.
"Market cap is what the company is worth." It is what the market currently values its shares at, which can differ greatly from the value of its business or assets.
"Small caps always grow faster." Some do, many do not; they also carry higher risk.
Frequently asked questions
How often does market cap change?
Every time the share price changes, so continuously during trading.
What is free-float market cap?
Market cap counting only shares freely available for trading.
What are large, mid and small caps in India?
Large-cap: top 100 by market cap; mid-cap: 101 to 250; small-cap: the rest.
Does a stock split change market cap?
No. There are more shares at a lower price, so the total stays about the same.
How to use this on PositoAI
PositoAI also groups companies by size in PosiCap, its own fixed market-cap classes, with the same ₹ bands for every country: Nano Cap (up to ₹100 Cr), Micro Cap (₹100 Cr to ₹1,000 Cr), Mini Cap (₹1,000 Cr to ₹10,000 Cr), Meso Cap (₹10,000 Cr to ₹1 lakh Cr) and Tito Cap (above ₹1 lakh Cr). Use Rankings to compare companies of a similar size, and the Screen page to filter by size. PosiStep 4 of the free PosiCourse covers share price, market cap and PosiCap.
Summary
Market cap is share price multiplied by shares outstanding, the market's total value of a company's shares. It changes every day with the price, is used in India to classify large, mid and small caps, and is the right way to compare company size, unlike share price alone. It is a market value, not a guarantee of what a business is truly worth.