Large Cap, Mid Cap & Small Cap Stocks & Mutual Funds - As per SEBI - YouTube

Subscribe to the Asset Yogi channel and press the bell icon

To watch the latest finance videos first.

Namashkar, my name is Mukul, and Welcome to Asset Yogi

where we unlock the knowledge of finance.

In this video, we will discuss what are small caps, mid-cap, and large caps stocks,

what are their advantages and disadvantages,

how you should invest in stocks.

In the last video of mine, I have talked about market capitalization

and share price and if you have not watched that video, then you should watch that video

To understand this video properly

and the link is in the description.

So small-cap, mid-cap, and large-cap are actually decided on the basis of market capitalization

which means how much is the value of the company in the market

But when you research on the internet, you will get various Definitions like

Rs.10000 crore+ is called large cap company,

or somewhere it is 20000 crore+ where in small-cap you will see the company having

250 crore+ or 2000 crore or 5000 crores

so the exact definition is not uniform so for making it uniform,

So SEBI issued a circular in the year 2017

and because mutual funds Invest in small-cap, mid-cap, and large-cap

That is why issued this circular

and we will see the exact definition of each of them and

we will understand how you should choose that

whether to invest in small-cap, mid-cap, or large-cap.

so lets go to our blackboard.

To understand all three concepts, we should first understand what is Market Capitalization.

I have made a detailed video on market capitalization

still, we'll see the formula

Every listed company have a share price

Price of one share multiplied by the total no. of share of the

It will give you the total market capitalization of that company.

Basically, the meaning of market capitalization is

The total market value of the company.

If anyone wishes to purchase the whole company

then they have to pay the total market value and then will be able to buy it.

So I think this is clear.

Now we'll look at the definitions of the small, mid, and large-cap.

As per the SEBI circular of 6 October, 2017 and I will show you the circular.

This is basically to uniform mutual funds schemes because it was not clear that which is a large, small, and mid-cap

According to the SEBI, Large-cap companies are those which are the top 100 companies as per market capitalization

Companies from 101st position to 250th are referred as mid-cap

and small-cap companies ranging from 251st onwards

If you want to know which are these companies then

You can follow the Nifty 100 index in which you will get 1-100th companies

After that nifty 150 index for mid-cap companies in which you will get these 150 companies.

And for 250th and onwards, you can follow Nifty 250.

Nifty 250 small-cap index is the index of 250 to 500th position

Now let's see the circular and we'll see where to see the indices

So this is the circular issued by SEBI on 6th Oct 2017 which is for mutual fund schemes.

Categorization and rationalization of schemes

So as you go down, you'll see that large-cap, mid-cap, and small-cap companies are defined clearly.

Large-cap are1st to 100th in terms of full market capitalization,

Mid-cap is 101st to 250th, small-cap 251st onwards in terms of full market capitalization

Now we will quickly view the nifty and how you can view the companies.

This is the National Stock Exchange website www.nseindia.com

If you search on google "Nifty 100 index" then you will find it.

Here it is clearly mentioned that these are the top 100 companies representing the top 100 stocks.

And it is written that these 100 companies consist of 74.8% of total market capitalization on NSE

That means these companies are huge.

Now, let's see the next 150 mid-cap index

You'll get Nifty 150 mid-cap index and click on it

This is the website of NSE and as we scroll down, this is showing companies from 101st to 250th

and they have a total market capitalization is around 13.5%.

So 75% for large and 13% here

So it covered nearly 88% in total

Let's see the small-cap, showing 250+ company index

Which is representing 6.9%

So you can see that the top 500 companies of Nifty,

100 large, 150 mid, and 250 small-cap covers 95% of the total market capitalization of NSE

You will get 500 index also as you can see

It's clearly written that these top 500 companies cover 95.2% of the overall market capitalization

And out of 95.2%, 74.8% are the top 100 companies

Now, let's compare these large, mid, and small-cap stocks on some parameters

like return potential, Risk, liquidity means how much volume is traded

If you bought any stock, will you be able to sell it or not?

Then how much is the volatility which means how much price fluctuates on a daily basis, we'll see that

How do institutional investors mean mutual funds or foreign institutional investors, invest in a huge amount

And with that, we'll see some examples as well

First, we have the Large cap companies.

These companies have moderate return potential

Because these companies are soo large that they find it difficult to grow more .

Imagine a company with a cap of 3 lakh crore

How much more can it grow? It has to reach 6 lakh crores for doubling it

That's why their risk potential is moderate but also the risk is low.

So when the market falls, these companies won't get affected too much.

Liquidity is very high as there are many institutional, retail investors so buy-sell is always happening

So it will never happen that you didn't get any buyer

Volatility is low as stock does not go too high or too low.

Institutional investors invest in large amounts in large-cap companies.

If we take examples, then there are many popular companies that come under SENSEX 30 and NIFTY50

Like Reliance, TCS, Infosys, HDFC, ICICI, L&T.

You might have heard the names of all of these

Now let's talk about mid-cap

Return potential is very high in mid-cap

Because growth opportunities are more

Suppose there is a company that has a market cap of 4000 cr or 5000 cr

so it can become a large-cap company in the future if it could give a return around 10 times

And if earnings become 10 times then price can also become 10 times and there's possibility of reaching 50,000 from 5,000

The risk is high definitely in comparison with large-cap

If the market falls, They get affected more than large-cap.

Liquidity is reasonably high here and definitely higher than small-cap but less than large-cap

Volatility is also high here because it keeps rising and falling.

In some stocks, volatility of 1-2% per day is also there that means price changes this much in a single day

Institutional investors, mutual funds, and foreign investors are highly interested in mid-cap companies

Because they are in search of a multi-bagger stock because they have to give returns to their investors

So they search for a mid-cap company that can become large-cap in future

If we talk about the current examples, I picked this from the Nifty 150 mid-cap index

Like Akzo Nobel which makes delux paints, Biocon which is a biopharma company,

CRISIL which is a rating agency, and you might have heard about Apollo tyres.

So all these are mid-cap companies

Now let's talk about small-cap companies

Return potential is very high that's why people think of investing in these but the risk is high as well

So keep this in mind

When the market goes down, those are the small-cap companies which fall first

And a huge fall is seen like 25-30%

Liquidity is low here because maybe you don't get buyers

And because buyers are fewer, chances of further fall in price are there

Similarly, when the market is in an uptrend, chances of increse in price are more because buyers are less

Now volatility is very high compared to the mid-cap

And it's seen of about 5% - 10% per day in small-cap stocks

Institutional investors are very few and few of them invest in small-cap.

Let me give you some examples which I picked up from Nifty 250 small-cap index

So for example, Allahabad bank, Bombay dyeing, Escorts Ltd, Escorts automobile, etc.

So these companies come under small-cap

Now, remember that a small cap company can go into mid-cap no one can stop it

Let's say the business goes good and fundamentals are strong then it can convert into mid-cap and finally large cap

And it can go reverse as well, large-cap can become a mid-cap and eventually small-cap as well and can also get bankrupt

So it's not necessary that a company that is large-cap now , will remain large-cap

And one more thing, these large-cap companies are also called blue-chip stocks

So if someone says blue-chip, that means large-cap companies

I hope you understood the concept of the large, mid, and small-cap

That's it for this video

If you want to share your thoughts related to this video or channel, you can write in the comment section

In fact, you can suggest topics for future videos as well

If you liked this video, then do like and share it

Because I keep sharing finance related videos on this channel daily

So if you haven't subscribed yet, then do subscribe to it and press the bell icon

So that you get the notification of my latest video

So let's meet in the next video, till then keep learning, keep earning, and stay happy.