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What are Large Cap stocks?
The market capitalisation of a company is the total value of its outstanding shares that are publicly traded. Stocks of companies listed on the exchanges can be classified based on their market capitalisation into three different types, namely, large cap, mid cap, and small cap stocks. Among these three categories, large cap stocks are in high demand because they generate stable returns (being market leaders) and provide both capital appreciation and dividend income. Let us find out more about large cap stocks, their benefits and we’ll also look at the list of top large cap stocks in India.
What are large cap stocks?
According to the Securities and Exchange Board of India (SEBI), the top 100 listed companies in terms of market capitalisation are referred to as large-cap stocks. Market capitalisation is calculated by multiplying the total number of outstanding shares of the company with the current market price of the shares. In common market parlance, large-cap stocks refer to the stocks of some of the largest companies listed on the stock exchanges. These companies usually have a market capitalisation of ₹20,000 crores or more. Compared to the other two classes of shares, large-cap stocks are often perceived to be financially stronger and less volatile.
Features of large cap stocks
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Low Risk
Large-cap companies are considered to be low-risk investment options owing to their financially stable nature. These stocks are less prone to market volatility and are generally capable of holding their value during economic downturns. -
Moderate Returns
Since large cap companies have already achieved a certain level of growth, their growth trajectory may be lower than that of mid or small sized companies. This can lead to such stocks producing moderate returns compared to growing companies. -
Price
The price of large-cap stocks is often higher than that of mid-cap and small-cap companies. -
Rich History
Large-cap companies are usually old, possess decades of experience in the business or industry, and have strong corporate governance practices. This makes them more reliable in the eyes of the investors. -
Liquidity
Since large-cap stocks are very popular among long-term investors, they’re often quite liquid. Buying and selling such stocks on the exchange is fairly easy.
Benefits of investing in large cap stocks
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Added stability for your portfolio
Adding large-cap stocks infuses some much-needed stability into your portfolio. Thanks to their established nature, they may protect your portfolio from going into deep losses due to unfavourable market movements. -
Multiple income sources
Most large cap stocks are known to regularly distribute their profits by way of dividends. By investing in large cap stocks, you not only get to enjoy capital appreciation but also gain a source of passive income. -
Easily accessible information on the company
Large cap companies routinely publish their financial statements and make timely regulatory filings. This makes it a lot easier to obtain all the relevant information on the company and assess its performance more accurately.
You can choose to invest in large-cap stocks individually or via a large cap mutual fund where you get diversification, professional management, and lower your investment risk. This route is ideal for new investors who have little stock market experience. On the other hand, if you have stock market experience and can reliably assess the risk and performance of a company, you can consider investing in individual large-cap stocks directly. Whatever you choose, invest without paying brokerage or commission with m.Stock’s Zero Brokerage account where delivery, intraday, F&O, ETFs, Mutual Funds etc are all available at zero brokerage for life.
