PosiStep 4: Share price vs company size: market cap and PosiCap
Many beginners think a share costing ₹2,000 belongs to a bigger or better company than one costing ₹50. It does not work that way. This PosiStep explains how to measure a company's real size, and what makes share prices move.
Market cap: price × number of shares
A company's total market value is its market capitalisation, or market cap: the share price multiplied by the number of outstanding shares (PosiStep 3).
The share price alone says little, because companies have very different numbers of shares. A ₹2,000 share in a company with few shares can be worth far less in total than a ₹50 share in a company with billions of shares.
Reading big numbers: crore and lakh crore
Indian market caps are written in crore (1 crore = 1,00,00,000 = 10 million) and lakh crore (1 lakh crore = 1 trillion). So ₹2,500 Cr is ₹25 billion, and ₹1 lakh Cr is ₹1 trillion.
US market caps are written in millions (M), billions (B) and trillions (T) of dollars. PositoAI shows Indian values in ₹ crore and US companies in both ₹ crore and US dollars.
Large cap, mid cap and small cap
Companies are often grouped by size. In India, SEBI uses a rank-based rule: the 100 largest companies by market cap are large cap, the next 150 (101st to 250th) are mid cap, and the rest are small cap.
In the US there is no official rule, but a common guide is above $10 billion for large cap, $2–10 billion for mid cap and $300 million to $2 billion for small cap. Larger companies are usually more established and their shares trade more easily; smaller companies can grow faster but tend to be riskier and more volatile.
PosiCap: PositoAI's own size classes
Because rank-based groups shift as markets move and differ between countries, PositoAI also uses fixed rupee bands for every country, called PosiCap:
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 · Tito Cap: above ₹1 lakh Cr. Infosys and Apple are both Tito Cap companies. PosiCap is PositoAI's own classification, not SEBI's or an index's.
Why share prices move
A share price changes whenever buyers are willing to pay more or sellers are willing to accept less. Underneath, prices move because people's expectations change: a company reports higher or lower profits, wins or loses a big contract, faces a regulator's order, or the whole market turns optimistic or fearful.
In the short term, prices can swing for reasons that have little to do with the business. Over long periods, they tend to follow how the company itself performs, though there is never a guarantee.
Key terms
- Market capitalisation (market cap)
- Share price × outstanding shares: the company's total market value.
- Crore and lakh crore
- 1 crore = 10 million; 1 lakh crore = 1 trillion.
- Large, mid, small cap
- Size groups; in India by rank (top 100, next 150, the rest).
- PosiCap
- PositoAI's own fixed size classes: Nano, Micro, Mini, Meso and Tito Cap, the same ₹ bands for every country.
- Tito Cap
- PosiCap class for companies above ₹1 lakh Cr in market value (roughly $11 billion and more).
- Volatility
- How much and how quickly a share price swings up and down.
Try it
Made-up company Alpha trades at ₹2,000 with 10 lakh shares. Made-up company Beta trades at ₹50 with 50 crore shares. Which is bigger by market cap?
Alpha: ₹2,000 × 10 lakh = ₹200 Cr. Beta: ₹50 × 50 crore = ₹2,500 Cr. Beta is 12.5 times bigger, even though its share price is 40 times lower.
See it live on PositoAI
Open the PosiCap page and see how many companies on PositoAI fall into each class. Then open Infosys and find its market cap, and check that it is above ₹1 lakh Cr (Tito Cap).
What this does not tell you
Market cap measures size, not quality or value. A big company is not automatically a safe one, and a small one is not automatically a bargain. Whether a price is high or low compared with the business is covered in PosiStep 14 and PosiStep 15.
Quick quiz
How is market cap calculated?
Market cap = share price × outstanding shares. It shows the total market value of the company.
A share costs ₹20. What does that tell you about the company's size?
Price alone says nothing about size. A ₹20 share in a company with many crore shares can make a very large company.
In India, which companies are large cap?
SEBI's rule is rank-based: the top 100 by market cap are large cap, the next 150 mid cap, the rest small cap.
Which PosiCap class is for the largest companies?
Tito Cap is PositoAI's class for companies above ₹1 lakh Cr. Nano Cap is the smallest, up to ₹100 Cr.
1 lakh crore rupees is the same as:
1 crore = 10 million, so 1 lakh (1,00,000) crore = 1,000,000 × 10 million = 1 trillion.
Answer every question on this page correctly to complete this PosiStep.
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PosiCourse is for education only. It does not recommend buying or selling any share. Examples with made-up numbers are not real companies. PositoAI is for research and education only and is not investment advice.