Tuesday, May 30, 2017

What is the Meaning of Small Cap Stock?

Small Tree and Small Cap Tag

Small-Cap stocks means those stocks with a small market capitalisation. Market capitalisation means the market value of all shares ((outstanding) of a company. 

There is no single, precise definition of small cap. It varies from country to country as well as between various brokerages within the same country.

For example, as per Investopedia a company that has a market cap of US$ 300 million to 2.00 billion (approximately Rs.1800 – 12000 Crores).  However, the Economic Times, the popular financial newspaper in India, defines small cap as a company having market cap of less than Rs.2000 crores.

Let us examine how the Bombay Stock Exchange (BSE) deals with the subject. BSE Small Cap Index comprises of small cap companies listed on the BSE. The small cap companies constituting the index and occupying the top five ranking and weight are as follows with market cap of quite different sizes:

Table showing top five BSE Small Cap Stocks

In conclusion small cap stocks means those stocks with small market capitalization or market cap. There is no precise definition for what actually constitutes small, though.