Mumbai11 hours ago
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Amid the declining trend in the stock market, last week there was a total decline of more than ₹ 2.74 lakh crore in the market capitalization of 9 of the top 10 most valuable companies of the country. HDFC Bank suffered the biggest loss in this decline.
During the week, the Sensex fell 2,091.68 points (2.67%), while the Nifty declined 566.85 points (2.32%). Hindustan Unilever was the only company in the top-10 list whose valuation has increased in the last week.
What is market capitalization?
Market cap is the value of the total outstanding shares of any company, i.e. all those shares which are currently held by its shareholders. It is calculated by multiplying the total number of issued shares of the company by their price.
Understand this with an example…
Suppose… people have bought 1 crore shares of company ‘A’ in the market. If the price of one share is Rs 20, then the market value of the company will be Rs 1 crore x 20 i.e. Rs 20 crore.
The market value of companies increases or decreases due to increase or decrease in share prices. There are many other reasons for this…
| what does it mean to grow | what does decrease mean |
| increase in share price | decline in share price |
| strong financial performance | bad results |
| positive news or event | Negative news or event |
| positive market sentiment | Economy or market decline |
| Issuing shares at high price | Share buyback or delisting |
What effect does market cap fluctuations have on the company and investors?
Impact on the company: A large market cap helps the company to raise funds from the market, take loans or acquire other companies. At the same time, small or low market cap reduces the company’s ability to take financial decisions.
Impact on investors: Investors directly benefit from increasing market cap. Because the price of their shares increases. At the same time, the fall may result in loss, due to which investors may decide to sell shares.
Example: If TCS’s market cap increases by ₹12.43 lakh crore, investors’ wealth will increase, and the company may get more capital for future investments. But if the market cap falls, it may incur losses.
