Market Capitalization or market capital value of the company is the total market value of a publicly-traded firm’s outstanding shares. In simple words, it indicates how investors value the company’s worth and its future possibilities. When you multiply the stock price with the shares outstanding, you get the market cap of that corporation.
For example, a company with 10 crore shares selling for Rs. 120 each share would have a market value of Rs. 1200 crores.
Market Capitalization: The Real Valuation
Let’s get deeper into this concept to learn it better, say Company A’s share price is Rs.100 and Company B’s share price is Rs.200. Now, looking at the share price can you guess which company has more value and is sounding more stable? With this limited information, you might think it’s Company B since its share price is double the price of the other.
But, in reality, if we add some more facts to it, like Company A has 5,00,000 shares and company B has 1,00,000 shares only.
Market Capitalization = Total No. of Outstanding Shares * Price of One Share
Now, will your answer change to the above query? Let’s calculate the actual market cap now
Company A: 5,00,000*100= Rs.5 crore
Company B: 1,00,000*200= Rs.2 crore
So, now did you see how market cap defines the real aggregate valuation of a company, a strong measure to check the company’s worth in the market.
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Different Market Capitalization Arrays in Stock Market:
Here are the different types of market capitalization. Remember, the market is dynamic and share prices keep fluctuating. So, there isn’t a fixed parameter for classifying companies. It’s normally the 80-15-5 rule that is applied to categorize companies into large cap, mid cap, and small cap. The top companies that cover upto 80% of total market cap of listed companies on BSE are large cap companies.
1. Large Cap:
Generally, businesses with a market capitalization of Rs. 20,000 crore or above fall in this category. They are well established, considered more stable with a proven track record and ample of information available on them. In most cases, they are also more expensive than other stocks because of their popularity.
Some years ago, even companies with a market cap of Rs.10,000 crore used to be considered as large cap, now they moved to mid cap category.
2. Mid Cap:
These are enterprises with a market share usually between Rs. 5000- 20,000 crores. They have high potential, lower market volatility and substantial information available on them.
3. Small Cap:
Smaller businesses with greater growth prospects, however they tend to be risky, with less information available and high chances of failure as they are still testing their business models. Their market value is usually below Rs. 5000 crores. The emerging startups having high growth but high risk are mostly small cap companies.
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Top 10 Companies in India by Market Cap: Best List
Here is an exclusive list of Best Companies in India based on market capitalisation as on 14th June 2020.
1. Reliance Industries Limited (RIL)
With a market cap of Rs. 10,74,351 crores, the company has advanced to an integrated performer across energy, materials, retails, digital services, and entertainment. Its newest subsidiary Jio garnered 300 million subscribers in 2.5 years. They were ranked #1 in Fortune India 500 and ranked #71 in Forbes Global list (2019).
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2. Tata Consultancy Services Ltd. (TCS)
TCS is considered one of the global leaders in IT services, digital and business solutions. It is one of the leading employers globally with over 448,460 professionals from 46 countries. They have a market cap of Rs. 7,64, 999 crores and ranked 64th in the Forbes world’s most innovative companies ranking.
3. HDFC Bank Ltd.
One of India’s leading private banks has a market value of Rs.5,39, 305 crores and a banking network spread over 5000 branches across 2787 cities and towns. It’s products and services include retail banking, wholesale banking, treasury, home loans, auto loans and credit digital wallets. The banks began as a scheduled commercial bank in January 1995.
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4. Hindustan Unilever Ltd. (HUL)
The firm is a subsidiary of Unilever and India’s largest fast-moving consumer goods company with a cap of Rs 4,94, 498 crores. The firm employs about 21,000 employees and boasts of over 35 popular brands such as Dove, Bru, Pepsodent, etc.
5. Housing Development Finance Corporation Ltd.
It is a leading provider of financial services in India with PAN India presence with 5130 branches across 2764 cities. With gross loans accounting to Rs 4.6 trillion and 7 million cumulative housing units financed till date. Its market value stands at Rs 3,10, 542 crores.
6. Bharti Airtel
With a cap of Rs. 3,05, 457 crores, Airtel is an Indian global telecommunications services firm operating in 18 countries across South Asia and Africa. It has 142.34 million subscribers and was named India’s 2nd most valuable brand in the first-ever Brandz ranking Millward Brown and WPP plc.
7. Infosys Ltd.
An Indian multinational firm with almost four decades of experience in business consulting, outsourcing services, and IT. It is considered a global leader in digital services and consulting with a client base spread over 46 countries. Its market cap stands at Rs. 2,94,773 crores.
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8. Kotak Mahindra Bank Ltd.
This is one of India’s leading banking and financial services group with a market cap of Rs. 2,53, 198 crores. Its products include insurance, banking, stockbroking, investment, wealth management and so on.
9. ITC Ltd.
ITC is a diversified conglomerate with expertise in hotels, consumer goods, paper boards, packaging, IT, and Agribusiness. Its present market value stands at Rs. 2,38, 469 crores, and is said to employ over 30,000 people across 60 locations in India. Fortune India, in association with the Hay Group, ranked ITC as “India’s most admired company”.
10. ICICI Bank Ltd.
ICICI Bank currently has a network of 5,275 branches across India and its consolidated total assets stands at Rs 12.50 trillion. One of the leading private sector banks in India has a market value of Rs. 2,22, 922 crores. The bank has a presence in the United Kingdom, Canada, United States, Singapore, Hong Kong, Bahrain, Dubai, and so on.
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Note: These details are on “as is basis”. They may vary on a later date based on the functioning and growth of different companies and changes in market.
In conclusion, understanding the market capitalization can help an investor in assessing the level of return, size, risk, liquidity, stability, and value of a stock. It is a helpful metric to evaluate the allocation of stocks in one’s portfolio with the best growth prospects. Do you wish to share your thoughts on the top 10 companies in India by market cap? Feel free to discuss.