Definition: Market Capitalization is the aggregate valuation of the company based on its current share price and the total number of outstanding stocks. It is calculated by multiplying the current market price of the company's share with the total outstanding shares of the company.
Market capitalization is one of the most important characteristics that helps the investor determine the returns and the risk in the share. It also helps the investors choose the stock that can meet their risk and diversification criterion.
For instance, a company has 20 million outstanding shares and the current market price of each share is Rs100. Market capitalization of this company will be 200,00,000 x 100=Rs 200 crore.
Stocks of companies are of three types. The stocks with a market cap of Rs 10,000 crore or more are large cap stocks. Company stocks with a market cap between Rs 2 crore and 10 crore are mid cap stocks and those less than Rs 2 crore market cap are small cap stocks.