3.6What is market capitalization?
1What is it?
Market capitalization (market cap) is the total market value of all a company’s shares.
2Why does it exist?
It tells you how big the company is in the stock market’s eyes. It is used to classify companies as large, mid or small cap (Level 9).
3Stock market example
In India, market cap is quoted in crore (1 crore = 1,00,00,000). Reliance, HDFC Bank, TCS and Bharti Airtel are among the largest companies by market cap, each worth many lakh crore rupees.
4Calculation
Market cap = Share price × Total shares outstanding
- Suppose price = ₹1,500 and shares = 600 crore (hypothetical).
- ₹1,500 × 600 crore = ₹9,00,000 crore
Market cap = ₹9 lakh crore.
5Risks
- Market cap is not the price of a share. A ₹50 stock can belong to a bigger company than a ₹5,000 stock.
6Quick revision
- Market cap = price × shares.
- Shows company size.
- Share price alone says nothing about size.
7Knowledge check
Q1. Price ₹200, shares 50 crore. Market cap?Show answer
₹10,000 crore.
Q2. Stock A costs ₹100 and Stock B ₹1,000. Is B a bigger company?Show answer
Not necessarily. You need shares outstanding to compare market caps.
Q3. How many zeros in one crore?Show answer
7 (1,00,00,000).