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# What is meant by Market Capitalisation?

Market Capitalisation is one of the best ways to evaluate a company. Market capitalisation is based on companyâ€™s stocks. It basically is the value created by multiplying the outstanding shares in the market by the value of each share. Market Capitalisation is a good measure to evaluate a company's size and strength. Investors can use Market Capitalisation to understand the growth & size of the company and the risk associated with it. The Higher the Market Capitalisation, the lesser the risk and the lesser is the scope for manipulation of its stock prices

## Formula to calculate Market Capitalisation

Market Capitalisation = No. of outstanding shares in the Market X Closing Price of each share

Example: Company Name A

No of Outstanding Shares = 10000

Closing Price of Each share = Rs.5

Market Capitalisation = 10000 X 5 = Rs.50000

## How does market cap affect stock price?

The market cap and stock price are essentially two ways of expressing the same information. Any change in one is immediately reflected in the other. As we know, the market cap is the company's total outstanding shares multiplied by its share price. You can also think of the share price as the market cap divided by the total outstanding shares. Market Cap is largely driven by the price of the stock as the total number of outstanding shares doesnâ€™t change regularly.

## Are Market Value and Market Capitalisation the same?

Market capitalization and Market value are clearly two different concepts.

Market value is determined with the help of various multiples such as P/E (Price to Earnings), P/S (Price to Sales), the future value of dividends, free cash flows, etc.

Market Capitalization on the other hand is simply determined by multiplying total outstanding shares X the current market price of the share

## How to Increase Market Capitalisation?

1. Market capitalisation can be increased when the price of the share moves up. Since market capitalisation is the outcome of price multiplied by the number of shares, the price of a share directly impacts market capitalisation

2. Companies can issue new shares that will also contribute to increasing the market capitalisation.

While the Large Cap companies face less volatility in the market, the disadvantage is that their growth rate may not be fast as small or mid-cap companies as they have already established themselves as a large player. It is definitely considered a stable investment. On the other hand, small and mid-cap companies can suddenly grow and increase the portfolio value in lesser time. However, all investors need to have a good mix of Large, Mid and Small stocks in their portfolios. Market Cap is largely used for long term investors. Swing Traders and Intraday Traders donâ€™t monitor or see the impact of market cap in their regular trading.

List of Top 25 Companies based on Market Capitalisation in the Indian Market as on 31st Mar, 2022.