Market Capitalization

 Shares.

 Issued Shares.

 Outstanding Shares:- Shares Traded in Market

 Outstanding Shares<=Issued Shares.

 Market Price:- Last traded price.

 Calculating Market Capitalization?

 Market Capitalization=Outstanding Shares*Current Market

Price

 Example:- A Company XYZ.


Issued Shares=1200

Outstanding Shares=1000
 Market Price=Rs.10
 Market Cap= 1000*10
 Market Cap=10000

the total cost of buying all the shares in the open
market!
 Importance of Market-Capitalization

1. Misconception of Higher Share Price for evaluating

company.
 Company A  Company B
 Stock Price Rs.500  Stock Price Rs.50
 Outstanding Shares  Outstanding Shares
 1000  100000
 M-Cap=500*1000  M-Cap=50*100000
 M-Cap=500000  M-Cap=5000000
 Importance of Market-Capitalization
Contd..

1. Classify Company into Different Caps.

Helps Investor in Choice Making

 Large Cap:- more than 500 Crore

 Mid Cap:- 100 Crore to 500 Crore

 Small Cap:- Less than 100 Crore


lower cap=higher growth but higher risk

Large cap=slow growth.
 Importance of Market-Capitalization
Contd..
 Easier to trade in Large-Cap

 Selecting Stocks For BSE.

 Measure of Liquidity.

 Investing in Stocks.
 Factors Affecting Market-
Capitalization
 Supply-Demand:- The fundamental rule.

 Earnings Growth:- profit per share last quarter.

 Price-Earning Ratio:- P/E (tells undervalue or overvalue).

 Risk

 News:- +ve or –ve.

 Factors Affecting Market-
Capitalization
 Market sentiments:- Current Market.

 Local & Global Economic Trends.

 Inflation.

 Buying/Selling Patterns of Institutional Investors.

 Market Capitalization
 Issued Shares (n).
 Outstanding Shares (o<=n)[don’t satisfy any
cond.]
 Holdings by founders or directors or acquirers which
has control element
 Holdings by persons or bodies with "controlling
interest"
 Government holding as promoter or acquirer
 Holdings through the FDI Route
 Strategic stakes by private corporate bodies or
individuals
 Equity held by associate or group companies (cross-
holdings)
 Equity held by employee welfare trusts
 Locked-in shares and shares which would not be sold
in the open market in normal course.