Large cap / mid cap / small cap
Large cap, mid cap and small cap are groups of companies sorted by their market cap, the share price multiplied by the number of shares. Large caps are the biggest companies, small caps are the smallest of the listed ones, and mid caps sit between. The size says nothing about quality.
How companies are grouped
Market cap is the total worth of a company in the market. Companies are often grouped as large, mid or small cap based on it. For mutual funds, SEBI sets the rule by rank: roughly the top 100 companies by market cap count as large caps, the next 150 as mid caps and the rest as small caps. The industry body AMFI publishes the list and updates it twice a year, so the exact line moves over time.
How they tend to differ
Large caps are usually older, better known and more heavily traded, so their prices tend to swing less. Small caps have more room to grow but also more room to fall, are traded less, and can be harder to sell in a hurry. Mid caps sit in between. These are tendencies, not rules.
Size is not quality
A bigger market cap only means a bigger company. It does not say that the business is well run, or that the share is fairly priced. A large company can be expensive and a small company can be sound, so size alone should not decide anything.
Where you will see the terms
Mutual funds describe themselves as large cap, mid cap or small cap funds, based on the companies they hold. Knowing the meaning helps you read what kind of risk a fund is built to take.
Grouping by rank (hypothetical numbers)
Suppose 400 companies are listed and ranked from largest to smallest by market cap. Under the rank rule, company number 40 would count as a large cap, number 180 as a mid cap and number 300 as a small cap. If company 300 grows and moves up to rank 90 the next time the list is updated, it would then be a large cap, although the business itself did not change overnight.
Common questions
- What is large cap in simple words?
- The biggest listed companies by market cap.
- How does SEBI define large, mid and small cap?
- For mutual funds it uses rank: roughly the top 100 are large, the next 150 are mid, and the rest are small. The list is updated twice a year.
- Are large caps always safer?
- They tend to swing less, but they can still fall, and a high price can make even a large company a poor buy.
- What is market cap?
- The share price multiplied by the number of shares a company has issued.