Large, Mid and Small Market Capitalization Funds

Large, Mid and Small Market Capitalization Funds

Large cap, Mid cap, and Small cap are categories used to classify companies based on their market capitalization. Market capitalization (market cap) can be defined as the market value of all the company's shares, calculated by multiplying the total number of Company’s outstanding shares by the current market price of one share.

What is Large Cap, Mid Cap and Small Cap?

Securities Exchange Board of India (SEBI) has defined Large cap, Mid cap and Small cap as follows:

  1. Large-cap stocks – 1st to 100th company in terms of full market capitalisation
  2. Mid-cap stocks – 101st to 250th company in terms of full market capitalisation
  3. Small-cap stocks – 251st company onwards in terms of full market capitalisation

[1] AMFI in consultation with SEBI and the stock exchanges has prepared a list of companies under each market capitalization viz., Large cap, Mid cap and Small cap based on the data provided by Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Metropolitan Stock Exchange of India (MSEI). The list can be found here.

Difference between Large Cap, Mid Cap and Small Cap Funds 

Primarily, the schemes of mutual funds are broadly classified into the following categories  and each of these categories  have multiple sub-categories of schemes: 

  • Equity Schemes
  • Debt Schemes
  • Hybrid Schemes
  • Solution-oriented Schemes
  • Other Schemes 

Individual investors primarily hold equity-oriented schemes. As of Nov 2024, [2] 87% of individual investor assets were held in equity oriented schemes. As the name suggests, the schemes under the equity category majorly invest in equity and equity related instruments.

The Large-cap, Mid-cap and Small cap funds, all the three categories fall under the Equity scheme. 

  1. Large cap fund: The Large-cap equity fund indicates the funds that invests predominantly in equity and equity related instruments of large cap companies. These are the top 100 companies in India, with the largest market capitalisation.
  2. Mid cap fund: Mid cap funds invest in equity and equity-related instruments of Mid cap companies that are ranked between 101 and 250 in the list of companies according to full market capitalization. 
  3. Small cap fund: Small cap funds invest in equity and equity-related instruments of Small cap companies that are ranked from 251st company and onwards according to full market capitalization. 

Characteristics of Large Cap, Mid Cap and Small Cap Funds:

  1. What is a Large Cap Fund?
    Large cap funds  invest  in  equity   & equity  related  instruments  of  large cap companies - a minimum of 80% of total assets.

    [3] Large caps are usually characterized by lower volatility in the long term and tend to tide over phases of economic downturn relatively better than Mid-caps and Small cap stocks. From the data below we can look at the performance of Large caps during the global financial crisis of 2008, followed by other calendar years such as 2011, and 2018, where Large caps (represented through Nifty100) have delivered better returns as compared to the Mid-caps (represented through Nifty Midcap 150) and Small caps (represented through Nifty Smallcap 250). 

Calendar Year

Nifty 100

Nifty Midcap 150

Nifty Smallcap 250

2006

40.2%

28.5%

32.9%

2007

59.5%

78.2%

97.4%

2008

-53.1%

-64.9%

-68.6%

2009

84.9%

113.9%

117.4%

2010

19.3%

20.1%

17.6%

2011

-24.9%

-31.0%

-35.1%

2012

32.5%

46.7%

40.4%

2013

7.9%

-1.3%

-6.4%

2014

34.9%

62.7%

71.7%

2015

-1.3%

9.7%

11.3%

2016

5.0%

6.5%

1.4%

2017

32.9%

55.7%

58.5%

2018

2.6%

-12.6%

-26.1%

2019

11.8%

0.6%

-7.3%

2020

16.1%

25.6%

26.5%

2021

26.4%

48.2%

63.3%

2022

4.9%

3.9%

-2.6%

2023

21.2%

44.6%

49.1%

  1. What is a Mid Cap Fund?
    Mid cap funds  investment  in   equity   & equity  related  instruments  of  Mid cap companies - a minimum of 65% of total assets. 
  2. What is a Small Cap Fund?
    Small cap funds  investment  in   equity   & equity  related  instruments  of  Small cap companies - a minimum of 65% of total assets. 

Gaining exposure to large cap, mid cap and small cap market segments:

Investors can take exposure to Large cap, Mid cap and Small cap market segments by purchasing individual shares of stock; or in a mutual fund format, that tracks an index based on Large-cap/Mid-cap/Small-cap benchmark; or through available index funds/ other mutual funds that are focused on Large-cap/Mid-cap/Small-cap investments.

*At Zerodha Fund House, we offer mutual fund schemes that track benchmarks across different market capitalizations viz., Large cap and Mid cap. To read more about them, you may visit the homepage of Zerodha Fund House. 

Conclusion:

Each category (Large cap/Mid cap/Small cap) offers different investing opportunities and challenges. Please keep in mind that investing requires in-depth research and analysis. So, kindly stay informed and make decisions that align with your long-term financial objectives. By understanding the above factors, you can build a diversified portfolio that suits your individual needs and maximizes your potential for investment success. 

Disclaimer:
* Please note that the details provided here represent current offerings and are subject to change. This information should not be viewed as financial advice or a recommendation to invest in Zerodha Mutual Fund schemes. Investors are encouraged to consult with their financial advisor for personalized investment advice.

The Nifty and SENSEX indices mentioned hereinabove are owned by NSE Indices Limited and AIPL, a wholly owned subsidiary of BSE Limited respectively. All information provided is for informational purposes only.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully

Please note that this article or document has been prepared on the basis of internal data/ publicly available information and other sources believed to be reliable. The information contained in this article or document is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party in any manner. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article or document.

Published on Jan 26 2025

Read more