Market Cap Explained in Hindi - #7 MASTER INVESTOR - YouTube

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Namaskar, my name is Mukul and welcome to asset Yogi.

Where we unlock finance knowledge

In this video, I am going to talk about a very simple but very important concept

Related to the share market, we will talk about a very basic topic

What is share price and what is market capitalization

You will understand its concept.

You may find it quite simple to hear,

But let me tell you that many educated people also do not understand these things.

There are many people in my family also who have invested at the behest of someone else.

And they have lost thousands and lakhs

And I think you will also have many such examples.

For example, suppose there are two companies

So the stock of a company is worth ₹50.

And the share of another company is ₹ 500

So many people think that if there is a share of ₹ 50

then its tendency to go up to ₹ 500 is very high.

There are chances of getting more growth.

Maybe a share of ₹ 500 can go up to 5000 in a very long time.

But is this the right comparison?

In this video, you will understand that this is not the right comparison at all.

And exactly what is meant by the share price

and what is meant by market capitalization.

I will explain this to you with a comparison also.

If You Buy Real Estate, How you can buy?

But you make big mistakes when you invest in the stocks market

you probably don't compare well

stock market investment, I also give you this example,

That is equivalent to swimming in the sea.

Because when you swim in the sea,

So the tide and the waves also come in the sea

And the water is salty too,

If you do not know swimming then

First, you have to learn the strokes

You will be swimming in Shell Water.

You will learn floating,

Then you will go to the deep water inside the swimming pool.

And then there is the final stage when you can think of swimming in the sea

Similarly, you should know the basics of the share market first.

After that, if you invest then I am sure that you will be able to earn very good returns

So without any delay let us understand

what are share price and market capitalization

Let's go straight to the blackboard.

Let us understand share price and market capitalization with an example

Suppose there are two companies, one company name is ABC Company

and the other company is XYZ company

Now there is a slight difference in the share price of both.

The share price of ABC company is ₹10

So the per-share price is ₹10.

And the price of one share of another company which is XYZ is ₹ 100

So here I write that ₹ 10 is per share price

And this is also a Per share price

So many people will think that this share is only ₹ 10,

It is cheap so we buy more of it.

Chances of its growth will increase, Because on today's date its price is cheap.

And since this share is worth ₹ 100, its price is already very high.

So we do not buy this stock, the chances of its growth are very less.

But is it a right comparison?

No, this is not a correct comparison at all.

Because here we don't have complete information

So we cannot say which stock is cheap and which stock is expensive.

Let me explain this to you with an example

Suppose if you go to buy a house, If we compare prices,

Let's say the value of one house is Rs.30,00,000

And the value of the second house is ₹ 50,00,000.

So here's how you will say which house is cheaper

Again, there is also very less information

So here we require the information of what is the area of ​​the house.

Suppose the area of ​​both is also equal

Let's assume the area of ​​both is a thousand square feet.

Now in the next information, you will calculate its price per square feet

So you will divide this ₹ 3,000,000 by 1000.

So your price per square feet will be 3000

And here your price square per feet will come to be 5000.

Still, you will say that this 3000 is costing me less.

This 5000 one is expensive,

No, This information is still less

Now the second information you need is at which location it is

Let's say this house A is in a Tier 2 city

Let's assume Kanpur

and house B in Delhi NCR.

Now it is obvious that the prices are low in Kanpur city.

And the price is high in Delhi NCR,

So how would you compare now?

Now you need one more piece of information that what is the average price in a city like Kanpur

Let's assume the average price there is ₹ 2500

if you're looking in Delhi NCR

Average price in that area is ₹7000

Now tell me which property is cheap

and which property is expensive.

At the location of Kanpur where you are buying a house.

There the average price is Rs 2500.

And you are going to buy it at ₹3000 per square feet

So this is not a cheap deal for you.

Similarly in the Delhi NCR location, your average price is Rs 7000

And it is cheaper for you in comparison to Rs 7,000.

So it is natural that you will go with ₹5000 per square feet.

So if you have 50,00,000 rupees.

So you will invest in this house which you are getting for ₹ 5000 square per feet.

Because the chances of its price increase are very high.

The chances of going from ₹ 5000 to ₹ 7000 are very high.

The thing which you are already buying is expensive, So how much will it increase?

You are already buying at more than the market price.

because ₹2500 is the average market price

And you are buying for ₹3000.

The same concept is applicable in the share market

You cannot tell whether it is expensive or cheap just by looking at the share price.

you need other information like how much is the floated number of shares of that company

Suppose this ABC company Can float any number of shares

It can float one lakh shares

It can also float ₹1 crore to 10 crores shares.

Let's say that the total number of shares the company has floated is ₹1 crore.

And let's say the total number of shares the XYZ company has floated 5 crore

Now we need more information

Now we will calculate market capitalisation

What is market capitalization?

Share price is multiplied by the number of shares

So what it becomes

When you multiply share price with the number of shares

Then the market value comes of the company

So the total number of shares is 1 crore

You multiplied it with the price of one share

So what is the total value of ABC company

So the total valuation of that company is 10 crore rupees

You will also do the multiplication in the XYZ company.

So what is its total value

Its value is Rs 500 crore

So can you compare these two companies with each other?

No, you cannot.

Because this is a very small company.

And this one is a very big company

Their sectors can also be different.

Maybe it's a cable manufacturing company or a printing company

Maybe a company of Rs 500 crores is a software company.

Maybe a company of Rs 500 crore may grow very quickly if the economy goes well

So when you want to call share price expensive or cheap

So you should compare a lot of things

you compare, and what things do you compare

There are many things like what is the price earning ratio

What's its price to book value ratio

There are many such comparisons.

like how much is the debt of that company

We will discuss these things in future videos.

but I hope at least you must have understood market capitalization and share price.

See when you talk about Sensex

You must hear about Sensex so let me tell you

the top 30 companies in the Sensex according to the market capitalization

This means the top 30 companies

Sensex consist of top 30 company according to market capitalisation

So in that the top thirty companies' value is taken.

Similarly in the Nifty, the value of top 50 companies

according to market capitalization is taken

Now if we talk about the most valued company in India

So Reliance was the most valued company for a very long time.

Which has just been replaced by TCS

So when you are talking about the value remember

You are talking about market cap

We will also its market cap in short

We talk about market capitalization when we talk about the value of a company

And second, you should not get confused between market value and book value.

Book value is the value according to accounting.

And the market cap is basically the market value

Based on the market, as here I have written

the value of a company that is traded on the stock market

That value is your market capitalisation

And as we have seen in the formula, you multiply the share price by the number of shares.

So you will get the market capitalisation

I hope you must have clearly understood the market capitalisation and share price

Now in the next video, we will talk about large-cap midcap and smallcap

What is their definition?

do they have an exact definition

Does this definition vary? People get very confused about this too.

I hope you liked this video, So please like and share it.

If you have any suggestions or want to suggest any topic for future videos.

So you can tell in the comment section below

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and be happy as always.