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 B Stock Price Rs.50 Outstanding Shares 100000 M-Cap=50*100000 M-Cap=5000000

Company A Stock Price Rs.500 Outstanding Shares 1000 M-Cap=500*1000 M-Cap=500000

Importance of Market-Capitalization Contd..

2. 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.