Difference between Small Cap, Mid Cap and Large Cap stocks: What should you know?

Last updated:
difference between large cap, mid cap and small cap stocks

Large Cap Vs Mid Cap Vs Small Cap: Introduction

If you are an old player in the Indian stock market, you must have heard all kinds of advice for investing in the market as per the market caps. Some talk about the safety net of the large-cap while some of them emphasize investing in the growth potential of the midcap and then some talk about what an underdog smallcap stocks can turn out to be. 

While all this advice certainly makes a substantial point, you as an investor must invest based on your knowledge, your investment type, and of course your risk appetite. Because without considering these fundamentals, your investment portfolio shall only be a factor driven by the herd mentality of the Indian stock market. This eventually shall give you stagnant profits and a huge disappointment.

So to save the day, this article provides you with some interesting insights to consider before you contemplate investing in large-cap or mid-cap, or small-cap stocks.

Summary in Brief

  • Understanding Market Capitalization
  • Criteria for classification of Companies into Large caps, Midcaps and small caps
  • Relevant factors to making an investment decision
  • Multicap funds
  • Best Large caps, mid-caps and small caps stocks in India
  • FAQs

What is Market Capitalization?

The capital market categorizes Indian stocks on the basis of their market capitalization. Market capitalization is a very simple concept. It is basically the market value of a company given by multiplying the total number of shares of the company with their current market price.

For example: Currently, the market price of a company X is 500 Rs and the total number of outstanding shares of this company is around 50,000. So, this gives us a market cap of company X as 2.5 Cr. 

As the market cap provides a truer picture than the market price of the share alone. Based on the increasing/decreasing value you can consider selling, buying, or holding your stock. In fact, experts say that market capitalization is one of the most crucial factors in the investing business that real-time investors must consider before diving into the ocean that the stock market is. 

Based on the market capitalization or market cap, the stocks are divided into the already discussed three categories i.e. large-cap, mid-cap, and small-cap stocks.

Difference Between Small Cap, Mid Cap and Large Cap Stocks

The Securities Exchange Board of India (SEBI), since 2017, has plugged an exquisite criterion to categorize the stocks in these three boxes. Let us understand the difference between the small-cap, mid-cap, and large-cap stocks with the help of a table

TypeMarket Cap range (in cr)Rank
Large-capAround 20,000 Top 100
Small-capBelow 5000251 onwards


Large-cap Stocks:

  • These are also known as Blue chip funds
  • Mutual funds that invest in these companies are called large-cap funds
  • These companies has usually good track records in the market.

Mid-Cap Stocks:

  • Mutual funds that invest in these companies are called Mid-cap funds
  • These are riskier than large-cap stocks
  • These may not be included in the broad market indices due to their limited presence

Small-Cap Stocks:

  • These are usually startups or companies in their development phase
  • These have a risk profile
  • These have negligible market presence


Relevant factors to making an investment decision

Before making an investment decision, an investor needs to understand some fundamental factors. Let us look at the same and based on that you can analyze the best suitable stock for you.  

  1. Risk Profile: Large-cap stocks are the riskiest out of the lot as these are top-notch companies trading in the share market with their market capitalization. Mid-cap stocks are riskier than large-cap stocks however less risky than small-cap stocks. Small-cap stocks are the riskiest due to their negligent trading in the market.
  2. Growth: Large-cap stocks are companies that are already at their maximum growth, therefore the further potential of these companies is timid. However mid-cap stocks and small-cap stocks have potential growth opportunities.
  3. Volatility: Large-cap funds are likely to be less volatile unless driven by external factors. However, mid-cap stocks and small-cap stocks are likely to be highly volatile due to their constant price fluctuations
  4. Return on Investment: Large-cap stocks are known to provide stable earnings and steady returns. While mid-cap stocks provide average returns and these returns are usually better than the returns by large-cap stocks. Small-cap stocks may be the riskiest, however, they provide the most stellar returns.

Suitable Investors

Large-cap Stocks: 

1. Investors who are generally looking for long-term investment options

2. The conservative Investors.

3. Investors with large capital  but low-risk appetite

Mid-cap Stocks:  

 1. Both long-term and short-term investors

 2. Moderate risk-takers

Small-cap stocks:

1.  Mainly short-term Investors

2. Investors looking for aggressive returns

3. Investors with high-risk appetite and good research skills  

Multicap funds

If you are someone who wants the best of all three worlds, multi-cap funds shall be your best choice to invest in. These are diversified mutual funds that invest in stocks across the three market capitalization spectrum. These funds consider prevailing and expected market conditions of the stocks and are thus termed capitalisation agnostic funds investing in stocks Multi-cap funds are specifically ideal for such investors who have a lower appetite for risk but would like to earn substantial returns.

Best Large-Caps, Mid-Caps, and Small-Caps Stocks in India

For an investor, it is best to diversify his portfolio by investing across the market caps in order to diversify the risk and earn the maximum potential returns. This can be best possible by thorough market research and identifying the best of stocks in the sphere of all three market caps. 

Also, by now you must at least have understood the main idea of investing in these large, mid, and small caps stocks. So, now let us look at some of these best stocks currently trading in the Indian stock market with the help of the table below

CompanyTypeCurrent Market Price (in Rs)Market Capitalization ( in Cr)
Tata Consultancy Services Ltd.Large-Cap3389.6512,40,290
Reliance Industries Ltd.Large-Cap2617.6017,19,970
Infosys Ltd.Large-Cap1,635.656,86,182
Oil & Natural Gas Corporation Ltd.Large-Cap140.551,76,816
ITC Ltd.Large-Cap340.304,22,323
Tata Motors Ltd. - DVR OrdinaryMid-Cap234.701,55,817
Bharat Heavy Electricals Ltd.Mid-Cap81.9528,536
NLC India Ltd.Mid-Cap83.5511,585
Rajesh Exports Ltd.Mid-Cap722.0521,319
Reliance Infrastructure Ltd.Small-cap147.804,211
Thomas Cook (India) Ltd.Small-cap75.403,498
Inox Wind Ltd.Small-cap119.653,318
Arvind Ltd.Small-cap93.052,428

(Data as of 25 November 2022) 

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

Important things to remember:

1. Do Not Blindly Follow Hot Tips

No matter how credible the source is, never follow a stock marketing tip blindly without conducting thorough research personally. Always select the stocks after doing proper research and analysis on the performance as well as the companies. While some tips can work out to give you huge benefits, the wrong ones can push you down under the risk pretty quickly. 

2. Eliminate Loser Stocks from Portfolio 

There is absolutely no guarantee that a stock will rise after a great fall. Know that it is extremely important to be practical about what is possible and what's impossible in the stock market. So, upon realizing that a stock is performing poorly in your portfolio, accept your mistake and sell it immediately to prevent further losses. 

3. Don't Exceed Your Investment Budget Abruptly 

While it's true that long-term investments are way better than other forms of investment, you shouldn't exceed your investment budget in a haste. Instead, decide on a fixed amount and invest it across various good stocks. Rather than investing in only one stock, divide your budget evenly across multiple good-performing stocks and shares. 

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

  • What is a Blue-chip Fund?

  • What are some of the large-cap, mid-cap and small-cap indices ?

  • How to choose a small-cap stock?

  • Which type of stock has high returns?