Context:
Investor sentiment is shifting away from small cap and mid cap (SMID) funds towards largecap-oriented schemes, particularly flexicap funds, amid ongoing market volatility and correction in the SMID space.
Understanding Market Capitalization
- Market Capitalization refers to the total market value of a company’s outstanding shares.
- Formula:
- Market Capitalization = Total Outstanding Shares × Current Market Price per Share
- It reflects a company’s market worth and is used to categorize companies into Large-cap, Mid-cap, and Small-cap.
SEBI’s Classification of Market Capitalization (2017 Guidelines)
| Category | Market Cap Range | Ranking by Market Cap |
|---|---|---|
| Large-cap | ₹20,000 crores and above | Top 1 to 100 companies |
| Mid-cap | ₹5,000 crores to ₹20,000 crores | 101st to 250th companies |
| Small-cap | Below ₹5,000 crores | 251st company onwards |
Large-Cap Companies
- Comprise the top 100 companies listed by market capitalization
- Known as blue-chip stocks
- Features:
- Strong market presence and track record
- Stable with lower risk
- Commonly included in major indices like Nifty 50
- Mutual Funds: Large-cap funds
Mid-Cap Companies
- Ranked from 101 to 250 in terms of market capitalization
- Features:
- Moderate risk and returns
- Growth-oriented with decent performance history
- May not be part of major indices
- Mutual Funds: Mid-cap funds
Small-Cap Companies
- Ranked 251 and below by market capitalization
- Features:
- Higher risk due to limited track record
- High growth potential, often include startups
- Low liquidity and typically not part of major indices
- Mutual Funds: Small-cap funds
Comparison: Large-cap vs Mid-cap vs Small-cap Funds
| Parameter | Large-cap Funds | Mid-cap Funds | Small-cap Funds |
|---|---|---|---|
| Risk Profile | Low risk, ideal for conservative investors | Moderate risk | High risk |
| Volatility & Liquidity | Low volatility, high liquidity | Moderate volatility and liquidity | High volatility, low liquidity |
| Returns & Growth | ~7% average returns (last 5 years), steady | ~10.28% average returns, moderate growth | ~14.74% average returns, high growth |
