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The Case For Small-Caps

By Admin Published date: 05/03/2021 Category: Investment Philosophy Views: 155

It is useful to think of investment opportunities in the publicly listed space in terms of market capitalisation. “Market-cap” is nothing but the number of outstanding equity shares of a company multiplied by its share price.

Large-cap companies are defined by SEBI as the top 100 listed companies by market-cap in India. Mid-cap is 101-250 and small-cap is everything else. There are about 5044 listed companies in India.

The 100th largest listed company has a market-cap of about 30,000 crores ($4 billion). The 250th company has a market-cap of about 10,000 crores ($1.3 billion).

The total market-cap of all companies listed on stock exchanges is 161 lakh crores. The total market-cap of the large-cap, mid-cap and small-cap segments is 119, 25 and 18 lakh crores respectively.

Therefore, 90% of all money invested in listed equities in India is invested in the top 250 companies (large- plus mid-cap). As a result of this, most professional investors, research analysts, bankers and financial news media are focused on these 250 companies.

Now, if there is an individual investor with a small amount of money to invest and they follow a sound investment process (easier said than done), try to guess where they are likely to be most rewarded for their effort.

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