Example:

Company ABC:

Share price = Rs 250

Total shares outstanding = 10 million

Market capitalization = Rs 250 x 10 million = Rs 2,500 million (or Rs 2.5 billion)

Company XYZ:

Share price = Rs 175

Total shares outstanding = 50 million

Market capitalization = Rs 175 x 50 million = Rs 8,750 million (or Rs 8.75 billion)

In this example, despite having a lower share price, Company XYZ has a larger market capitalization than Company ABC, indicating that it is a larger company.

Market capitalization is a more accurate measure of a company's size and market value, and it's commonly used to classify companies into different categories, such as:

• Small-cap

• Mid-cap

• Large-cap

• Mega-cap

Each category has its market capitalization range, and investors use these categories to gauge the level of risk and potential return on investment.

Market capitalization is the product of the current stock price and the number of outstanding shares, representing the company's current market value. This metric gives investors an idea of the company's size and market worth.

Your examples illustrate how market capitalization can differ significantly between companies, even if their share prices are similar. The comparison between Reliance Industries and MRF Ltd highlights how market capitalization provides a more accurate picture of a company's size than share price alone.

Now, let's move on to how companies are classified based on their market capitalization:

Micro-cap: Less than Rs 100 crore

Small-cap: Rs 100 crore to Rs 500 crore

Mid-cap: Rs 500 crore to Rs 10,000 crore

Large-cap: Rs 10,000 crore to Rs 50,000 crore

Mega-cap: More than Rs 50,000 crore

These classifications help investors understand the company's market position, risk profile, and growth potential.

LARGE-CAP

Large Cap companies are typically defined as those with a market capitalization of over Rs 5000 Crores (~ USD 670 million). These companies are often industry leaders, with a stable track record of growth and a strong market presence.

You're also right that, from a global perspective, many Indian large-cap companies would be classified as Mid Cap or small-cap companies. The global definition of Large Cap typically includes companies with a market capitalization of over $10 Billion (~ Rs 75,000 Crores), which is significantly higher than the Indian definition.

This highlights the importance of considering the market and industry context when evaluating company size and market capitalization.

MIDCAP

Mid-cap companies in India, with a market capitalization between Rs 1000 Crores and Rs 5000 Crores, are often emerging players in their industry, poised for growth and potentially on the path to becoming Large-cap companies.

As you mentioned, mid-cap companies can exhibit high growth rates, which may be exaggerated by their smaller base. This can make their growth appear more impressive when expressed as a percentage. However, it's essential to consider other factors, such as financial health, management quality, industry trends, and competitive position, to get a comprehensive picture of their potential.

Mid-cap companies often offer a balance between stability and growth potential, making them attractive to investors seeking to balance risk and return.

SMALL CAP 

Small Cap companies in India, with a market capitalization of Rs 1000 Crores or less, are typically new players in their industry, with high growth potential. They may be in the early stages of development but have the potential to grow rapidly and eventually become mid-cap companies.

You're also spot on that market capitalization gives a more accurate picture of a company's size and market value, rather than share price alone. Share price can be misleading, as it doesn't take into account the number of outstanding shares. Market capitalization, on the other hand, provides a more comprehensive view of a company's market value.

Small Cap companies can be attractive to investors seeking high growth potential, but it's essential to approach them with caution, considering factors like financial health, management experience, industry trends, and competitive landscape.

Where to invest? 

Deciding where to invest can be tough. The right answer depends on your personal financial goals, how much risk you're willing to take, and your financial situation. Here's a brief guide to help you understand what to expect when investing in different types of stocks, categorized by their market capitalization 

What to Expect from Large Cap Stocks

Large-cap stocks are shares in well-known companies that are very successful and have a lot of resources. Here are some good things about large-cap stocks:

Steady Growth: These companies tend to grow at a steady pace, which can be a good thing for investors.

Less Risky: Large-cap companies are less likely to have sudden surprises, like a sudden drop in value. Their earnings reports are usually pretty predictable.

Favorite of Foreign Investors: When foreign investors put money into the Indian market, they often start with large-cap stocks. These stocks are a good choice for investors who want to play it safe and hold onto their shares for a long time.

Market Leaders: When the market starts to recover from a downturn, large-cap stocks usually lead the way. Mid-cap and small-cap stocks might take a little longer to catch up.

Do Well in a Good Market: Large-cap stocks tend to do better than mid-cap and small-cap stocks when the market is doing well.

Dividends: Large-cap companies often pay out dividends to their shareholders regularly. Smaller companies might not pay dividends as often because they're using their extra money to grow their business.

What to Expect from Mid-Cap and Small-Cap Stocks

Mid-cap and small-cap stocks represent companies that are still growing or smaller in their industry. Here's what you need to know:

High Growth Potential: These companies have the potential to grow quickly and may exceed expectations.

Unpredictable: Mid and small-cap stocks can be volatile, meaning their prices can fluctuate greatly and may surprise investors every quarter or year.

Potential for Big Returns: If you're looking for stocks that could multiply in value, mid and small-cap stocks are a good place to look.

Higher Risk, Higher Reward: While mid-caps have the potential for higher returns, they also come with higher risk. Their earnings can be affected greatly by downturns in the market.

Less Liquid: Mid and small-cap stocks are not traded as frequently as large-cap stocks, which can lead to a decline in price during a market downturn. It's important to check the stock's liquidity before investing.

Most Affected in a Market Crash: If you're expecting a market correction, it's best to sell your mid and small-cap stocks first, as they are more vulnerable to crashes.

Perform Poorly in Uncertain Times: During uncertain periods, mid and small-cap stocks tend to perform worse than large-cap stocks.

Tips for a Balanced Approach

To be smart about investing, it's a good idea to spread your investments across different types of stocks and industries. Here's a good rule of thumb:

Balance Your Portfolio:

 Divide your investments into:

60% large-cap stocks (stable and steady)

30% mid-cap stocks (growing and potentially exciting)

10% small cap stocks (high potential but risky)

Avoid Extremes: 

Investing only in small or mid-cap stocks can be too risky, while only investing in large caps might not give you the best returns.

• Consider Your Risk Appetite: No matter what the market is doing, think about how much risk you're willing to take on and invest accordingly.

• Adjust Your Strategy: As market conditions change, you may need to adjust your investments to get the best results. However, this can be tricky and may not be suitable for beginners.