MARKET CAPITALISATION

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Context

• Alphabet's market capitalization is $1.82 trillion.

Overview:

• Market capitalization (market cap) in India refers to the total value of all listed companies' outstanding shares on the stock exchange. It is a key indicator of a country's economic performance and investor sentiment.

Calculation:

• Market capitalization is calculated by multiplying the current market price of a company's stock by the total number of outstanding shares.

Categories:

Companies in India are often categorized based on their market capitalization:

• Large-cap: Companies with a market cap exceeding Rs. 20,000 crores.
• Mid-cap: Companies with a market cap between Rs. 5,000 crores and Rs. 20,000 crores.
• Small-cap: Companies with a market cap between Rs. 1,000 crores and Rs. 5,000 crores.
• Micro-cap: Companies with a market cap below Rs. 1,000 crores.

Significance:

• Market capitalization is a crucial metric for investors, as it helps in evaluating the size, risk, and growth potential of a company. It also influences the weighting of stocks in various indices and exchange-traded funds (ETFs).

Indices:

• In India, market capitalization is used to categorize companies in stock market indices like the BSE Sensex and the Nifty 50. These indices track the performance of companies with different market cap sizes and are used as benchmarks for the Indian stock market.

Trends:

• India's market capitalization has been growing steadily over the years, reflecting the growth of the Indian economy and the increasing participation of retail and institutional investors in the stock market.

Impact of Market Cap on the Economy:

• The market capitalization of a country's stock market is often used as an indicator of its overall economic health and attractiveness to investors. A growing market capitalization indicates a robust economy and investor confidence.

Regulation:

• The Securities and Exchange Board of India (SEBI) regulates the Indian stock market, including market capitalization reporting and disclosure requirements for listed companies.

PRACTICE QUESTION Q. Which of the following statements about market capitalization in India is/are incorrect? A) Market capitalization is calculated by multiplying the current market price of a company's stock by the total number of outstanding shares. B) Small-cap companies in India have a market capitalization between Rs. 1,000 crores and Rs. 5,000 crores. C) Market capitalization is not used as a metric for evaluating the size, risk, and growth potential of a company. Select the correct statement(s) using the codes below: 1.    A only 2.    B only 3.    C only 4.    A, B, and C Answer: 3. C only