What’s small, mid, or large cap?

Monkey caps are something everyone wants, needs and loves. However, you’d never wear them publicly or admit your love for them. More like your college crushes.

But in finance ‘cap’ refers to market ‘cap’italization. Market cap is total shares outstanding multiplied by the value of one share. It is a measure of how big your company is perceived by the market.

Imagine you owned a coffee business worth INR100 and wanted to open it for public investment. You issued 100 shares at INR 1 each and kept 20 for yourself. The common junta then had 80 shares at INR 1 to purchase. However, seeing the potential in your coffee business, not 80, but 400 people wanted to buy your shares. Considering the balance that had to be maintained between demand and supply, the share price rose to INR5 apiece. 

Your business is now capitalized for market at 5*100 or at INR500 market cap. In India, the top 100 companies arranged in a descending order on the basis of market cap are called as large cap companies. They are relatively stable and have good market experience. Safe bets, so to say. Companies ranked 101st to 250th are mid cap firms and the ones from 251stare classified as small caps.

That’s it. Just to add, taking your private business public on an exchange (like BSE/NSE) so that anyone can invest in it is called an IPO (Initial Public Offering). But it’s not that straightforward, so more on that in IPO 101.