Large cap
Key Takeaways
- large-cap companies are classified as companies with market capitalization more than Rs.10,000 crore.
- The size of the large-cap company provides credibility and trust to the investor that it will never go out of business, and it is safer to invest in such companies.
- Market Capitalization represents the worth of the company as determined by the stock market.
What is the meaning of Large Cap?
Large Cap also called Big Cap refers to those companies which are ranked among top 100 companies by way of market capitalization according to SEBI. Large Cap is a short term for Large Market Capitalization. In India, large-cap companies are those companies that have market capitalization more than RS. 20,000 crores.
Benefits of investment in Large-Cap Stocks
Stability: Large-cap companies are more stable than other companies. No one wants to invest in a company which will go out of business quickly. The size of the large-cap company provides credibility and trust to the investor that it will never go out of business, and it is safer to invest in such companies. With already at the leading position in the market, it is hard for large-cap companies to proliferate.
Safer in the downturn: Large-cap companies are not immune to recessions. When the market is facing a decline, along with small-cap companies, it also affects the large-cap companies. Still, large-cap companies have the ability and the capacity to withstand in a slowdown, not having to go out of business.
Dividends: The stocks of large cap companies act as a source of income for investors with a conservative perception. As earlier said, large-cap companies do not grow quickly, so companies pay dividends because they do know the prices of stock won’t appreciate as fast as the growth of the company.
Market Capitalization
Market Capitalization shows the market size of the company.
Market Capitalization represents the worth of the company as determined by the stock market. The company’s market capitalization is defined as the total market value of its outstanding shares.
Market Capitalization has three main categories, which are small cap, mid cap, large cap. But such classifications are only approximations because these are based on the current situation of the market, and it may change over time.
How to calculate a company’s market cap?
Market capitalisation or market cap is the value of the total outstanding shares of a company. It is calculated by multiplying the total number of shares issued by the company with the price of a share.
Large Cap vs. Small Cap
Small Cap: small-cap companies are the companies, which have market capitalization lower than Rs.2,000 crore. Since small cap includes young companies that serve new emerging markets, it inherits a higher risk because these companies have limited resources and are more vulnerable to intense competition and uncertainty of the market.
Large Cap: large-cap companies are classified as companies with market capitalization more than Rs.10,000 crore. Large-cap companies are major well-established companies with stable business models in the industry. The investor who does not want to take any risk invests in large-cap company’s shares. Large-cap stocks are considered a safe investment. Investing in large-cap stock, the investor gets moderate yet safe returns. Large cap stocks are often fairly-priced, with sizable and credible information about them available in the market. Large cap stocks are considered to be low-risk . Investing in large cap stocks may not give high returns in the short term but is considered to be a good move for long-term investments.