Market capitalisation
Also called: market cap, market capitalization
The price tag the market puts on a whole company: the share price multiplied by the number of shares.
Market capitalisation, usually shortened to market cap, tells you how big a company is in the market’s eyes. The price of one share tells you nothing about size, because one company may have a hundred times as many shares as another.
SEBI sorts listed companies by market cap. The 100 largest are large caps, the next 150 are mid caps, and everything below that is small cap. AMFI publishes the list every six months and mutual funds have to follow it.
Example
Company A trades at 3,000 rupees and has 1 crore shares, so its market cap is 30,000 crore. Company B trades at 30 rupees and has 1,000 crore shares, so its market cap is also 30,000 crore. Same size, very different share prices.
Watch out
Market cap is what the shares are worth today, not what the business is worth. It changes every second the market is open, and a low share price does not make a company small or cheap.
Learn it properly in
Chapter 1.1: What a share actually is, and what you own when you buy one