What is Difference Between Large Cap, Mid Cap & Small Cap

What Is Difference Between Large Cap, Mid Cap, And Small Cap Funds? Explained

Read the article to further intercept the difference between between large cap, mid cap & Small cap in stock market.
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  • 22 Oct 2023
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It is essential for newbies to the stock market to understand, What is large-cap, mid-cap, small cap, and market cap in stocks. The differences in growth potential and risk are shown by these categories. Small-caps have growth potential, mid-caps strike a balance between stability and expansion, and large-caps are dependable , well-established businesses. To help with informed investing, Let's dig deeper into the article to get a better understanding of these stocks.

When beginners enter the stock market, they often have questions about which stocks to invest in. Such questions can overwhelm even a seasoned investor. Stock market investors must have sufficient knowledge to determine which stocks are the right choice for their investment strategy. If you have no clue about which stocks you should put money in, you could face losses. The share market has inherent risk and this risk varies from one stock to another.

Stocks in the stock market are often classified based on their market capitalisation (or market cap) as large-cap, mid-cap, and small-cap stocks. This categorisation helps investors to make informed investment decisions. This article will help you understand the differences between small-cap, mid-cap, and large-cap stocks, assisting you in making better-informed investment choices. Let us first learn about the meaning of market capitalisation and its categories in detail.

Market capitalisation refers to the total number of outstanding shares of a company in the market multiplied by the current price of each share. It is a measure of the estimated valuation of a company.

To make things simpler, let us consider the meaning of market capitalisation with the help of an example. Suppose ‘ABC’ Company has 20,000 outstanding shares in the market and each share is priced at Rs 20. Then, the market capitalisation of ‘ABC’ Company will be calculated as follows:

Outstanding shares x price per share

20,000 x 20 = Rs 4,00,000

Therefore, the market capitalisation of ‘ABC’ Company is Rs 4,00,000.

The stock of companies that are traded on the stock exchanges can be categorised into three broad categories: large-cap, mid-cap, and small-cap. Let us learn about each of them in detail.

Large-cap companies are businesses that are well-established and have a significant market share, like market caps of Rs 20,000 crore or more. These companies dominate the industry and are very stable. They hold themselves well in times of recession or during any other negative event. Besides, they usually have been functioning for decades and have a good reputation. If you want to invest in a company’s stocks by taking less risk, then large-cap stocks are a good option. These stocks are less volatile in comparison to mid-cap and small-cap stocks, and lower volatility makes them less risky. However, since they come with low-risk, the returns here can be relatively lower than mid and smallcap stocks.

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Reliance Industries and Infosys are examples of some large-cap market companies that are listed on the stock exchanges of India. Their strong foothold in the market and consistent good performance makes them good choices for long-term investors.

Mid-cap companies are those with market caps above Rs 5,000 crore but less than Rs 20,000 crore. Investing in these companies can be riskier than investing in large-cap market companies, because mid-caps tend to be more volatile. On the other hand, mid-cap companies also have the ability to turn into large-cap companies in the long run. These companies can offer a higher growth potential than large-cap stocks do, hence, more investors are attracted to investing here.

Metropolis Healthcare, Castrol India, and LIC Housing Finance are some examples of mid-cap companies that are listed on the stock exchanges of India.

Small-cap companies are those that have a market capitalisation of less than Rs 5,000 crore. These companies are relatively smaller in size and have significant growth potential. What makes them risky is the low probability that they will be successful over time. This makes the stocks of such companies volatile in nature. Small-cap companies have a long history of underperformance but when an economy is emerging out of a recession, small-cap stocks often prove to be outperformers.

Bajaj Consumer Care, Shobha Ltd, and VST Industries are some examples of small-cap market companies that are listed on the stock exchanges of India.

Here’s the table outlining the quick comparison of small cap vs mid cap vs large cap companies based on various important factors.

Aspect Large-Cap Companies Mid-Cap Companies Small-Cap Companies
Company Type and StatureWell-established and stableCompact, growth potentialSmaller, significant growth
Market CapitalizationRs 20,000 crore or more5,000 crore to 20,000 crore rupeesLess than Rs 5,000 crore
VolatilityLow volatilityModerate volatilityHigh volatility
Growth PotentialLower growth potentialModerate growth potentialHigher growth potential
LiquidityHigh liquidityLower liquidityLeast liquidity

Keep in mind that different stock exchanges and market situations may alter how companies are classified. When evaluating investment opportunities, it's critical to take a range of factors and market trends into consideration.

Mutual Funds And Market Capitalisation

Mutual funds are an integral part of the Indian financial system. Mutual fund schemes are categorised into large-cap, mid-cap, or small-cap funds based on their investment allocation. For example, a large-cap mutual fund scheme will mainly invest in large-cap stock, while mid-cap and small-cap schemes will invest in mid-cap and small-cap stocks, respectively.


Just make sure to factor in your financial goals, appetite for risk, and investment horizon before investing. Also, keep in mind that investing in the share market or in mutual funds requires research and analysis. If you're starting your investing journey or need support, it may help to open an account with a large broker like Kotak Securities. This will bring you access to market research and analysis, along with a wide range of educational resources.

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