MARKET CAPITAL

What is market capital???
                   Market capitalization is the total value of issued shares of a publicly traded company.  In simple word,market capitalization almost equal to current market value of the company,it doesn't evaluate the total asset of the firm. Suppose you looking to buy a company & all of it's shares. Then that firm will offer some price for their firm which is almost equal to market capital of the firm. By using market capitalization we can predict the net worth of the company. Market capital is calculated by 

     Market              Total outstanding      Current market                        capitalization   =           share             x      price (CMP)  

              Let’s understand it with the help of an example. Suppose, you decided to purchase XYZ Industries, when its shares were trading at Rs.150 and the number of  shares outstanding were 1 crore. You would have paid,

  Rs.150     x    1,00,00,000    =    Rs. 150,00,00,000
i.e., Rs. 150 Cr. is the Market Capitalization of XYZ Industries.
    
                                        However, what you should remember is that the market price of a share is the public opinion about the worth of a company’s stock. Thus, Market Capitalization is the public opinion of what the whole company is worth. This opinion is based on the past performance, future prospects and market sentiments of the public about the company. The market capitalization changes with time as a result of factors like company performance, economic factors like inflation, interest rates, etc. In India, you can find companies with market capitalization ranging from a few lakh to as much as few lakh crores! As a result, companies are usually classified as large-cap, mid-cap and small-cap companies. 

What are large-cap, Mid-cap and Small cap????
         We frequently heard the above words in our market circumstances. for example Relaince, TCS, Ongc called large capital stocks. Let us see how they are classified by using market capitalization???....

The 80-15-5 method:

                   BSE’s classifies companies according to their Market Capitalization by using the 80-15-5 method. Here’s how this method works:

• Arrange all the companies in descending order of their Market Capitalization.
• The group of companies from the top, which together contribute 80% of the total Market Capitalization are Large-cap Companies,
• The next group of companies contributing 15% (80-95%) of Market capitalization are Mid-cap companies, and
• The remaining companies which contribute 5% of Market Capitalization are Small-cap companies.

Thus, the Large-cap companies, Mid-cap companies and Small-cap companies contribute 80%, 15% and 5% of the total Market Capitalization of the market respectively. This is known as the 80-15-5 method. The number of small-cap companies is the highest followed by mid-cap and large-cap companies. Thus, a small proportion of the total number of companies (large-cap) contribute the major part (80%) of total market capitalization.  

                                Here we explained by using colors, please imagine like traffic signal. If signal gives green means we can go, red means we never go. Yellow means we have to take the move care-fully.  We suggest You can buy large cap anytime &  anywhere. In mid-cap you have to analysis whether to buy or not And finally never go small gaps.

                         

         However, this does not mean that if the market falls or rises considerably, large-cap companies will become mid-cap and midcap will become small-cap, or vice-versa. Rather, the above ranges will change with a change in Total Market Capitalization.

What is different between these Categories???

                         Market capitalization is regarded as an indicator of a company’s size. Large-cap companies are more robust. A large-cap company can be compared to a heavy goods carrier, while a midcap company to a mini carrier. If there is a speed breaker/bump on the road, the chances of a mini carrier getting knocked down are much more as compared to the heavy goods carrier. At the same time, a mini carrier picks up speed quickly and travels faster as compared to the heavy goods carrier; which requires time to catch up speed but has better stability and momentum. Given below is a comparative account of Large-cap, mid-cap and small-cap companies.

 Before go to trade in any stocks, please consider market capital also act as a key factor for profit making.....