Difference Between Large, Medium, and Small-Cap Funds

A mutual fund is an organization that collects money from various investors and invests that amount in stocks, bonds, debt instruments etc., on behalf of the investor. The collective holding of the mutual fund is known as its portfolio. In this article, we will be discussing mutual funds where the money thus collected is invested in equity shares of the companies.

When a layperson enters the share market, he often doubts which shares to put his money. Such doubts can suppress even an experienced investor.

Investors in the stock market need to have sufficient knowledge to understand their investment strategy to understand the stock market.

If the investor knows little or nothing about the share market and puts his money in, he is sure to make losses. The market has inbuilt risks that change from time to time.

Shares in the stock exchange are grouped according to their market capitalization (or market cap) as large-cap, mid-cap and small-cap stocks. This grouping helps the investors to decide on investment choices.

This article will update you on the various parameters upon which large-cap, mid-cap, and small-cap funds are based.

Market capitalization

Let us first understand what market capitalization is.

Market capitalization is the total number of outstanding shares of a company (excluding that of the promoters) available in the market multiplied by the current market price of each claim.

It is the expected estimation of a company.

Let us make it simpler:

  • Assume that XYZ Company has 20,000 outstanding shares in the market, and each share of this company is priced at Rs 25.

Then, the market capitalization of XYZ Company is calculated as:

Outstanding shares x price per share

20,000 x 25 = Rs 5, 00,000

Therefore, the market capitalization of XYZ Company is Rs 5 00,000.

The companies traded in the stock exchanges are divided into three categories: large-cap, mid-cap, and small-cap. Let us know them one after the other.

Difference Between Large, Medium, and Small-Cap Funds :

Large-cap stocks

Large-cap stocks are those companies that are in business and are well stabilized and have a considerable market share. Large-cap companies have a market cap of more than Rs 50,000 crore in the stock market and are ranked among the top 100 companies.

These companies are market leaders in their respective industry lines and are highly stable. They are steady during the recession time or at times of any depressing occasions. These are established and reputed companies that are surviving for several years.

Investment in such large-cap company stocks are more or less risk-free and are a better choice. Large-cap stocks are more consistent in comparison to mid-cap and small-cap stocks.

The top 5 large companies listed in India with their market cap are given below:

Company Name Market Cap
(Rs. cr)
Reliance 15,42,892.45
TCS 14,14,276.81
HDFC Bank 8,63,337.89
Infosys 7,18,869.79
HUL 6,57,474.37


Their firm grip on the market and steady performance is a good bet for any long-term investors.

Mid-Cap Stocks

Mid-cap stocks have a market cap above Rs 5,000 crore but are less than Rs 20,000 crore. These companies are ranked between 101 to 250.

Investing in mid-cap companies can be fairly riskier than investing in large-cap market companies, as they are inclined to be more unstable.

However, mid-cap companies can grow into large-cap companies. The mid-cap companies have real growth possibilities compared to large-cap companies, so more investors invest in such companies.

Given their advantageous position in the stock market, they developed into the favourite for testing investors.

Mid-cap companies help investor’s in diversifying their portfolio. They show good growth in profitability has an added advantage to reach the large-cap level.

Company Name Market Cap
(Rs cr)
Adani Total Gas 1,54,803.77
Hind Zinc 1,34,618.66
Mindtree 71,739.73
SRF 63,180.57
MphasiS 59,954.31

Small Cap Stocks

Small-cap companies have a market capitalization of less than Rs 5,000 crore and are ranked from 250 onwards. These are relatively small-size companies but have considerable growth potential.

Nevertheless, they are risky by nature and maybe low in profitability; still, they may be doing well over some time. As such, the small-cap companies are expected to be volatile.

Small-cap companies are mainly poor performers, but the possibility of them rising in the market during a slump can turn them into winners.

Company Name Market Cap
(Rs cr)
Linde India 22,266.00
APL Apollo 22,046.64
Alkyl Amines 20,279.63
Kajaria Ceramic 17,888.02
IEX 17,486.61


How do you Choose a Suitable Mutual Fund Scheme For Your Investment Portfolio?

All that was explained up to now was regarding the Large, Medium, and Small-Cap shares. Now we discuss the Large, Medium, and Small-Cap mutual funds.

According to their policy, the mutual funds invest the available funds either in Large, Medium, and Small-Cap shares.

  • Market risks

Similar to the share market, large-cap funds’ investment is less risky than mid-cap funds and small-cap funds. Your investment decision could depend on your risk tolerance appetite.

  • Risk in Large-Cap Funds

Large-cap funds invest mainly in the shares of blue-chip companies. Such funds have inborn advantages. These companies are gigantic and have steady businesses, and can survive during market instability.

The demand for their products is high, which makes their shares highly liquid. Their growth possibilities and the risk factor are low. Returns for investment in large-cap funds are not many but are steady over the years.

  • Risk in Mid-Cap Funds

Mutual funds invest primarily in mid-cap stocks, as there are higher chances of growth and reasonable prospects of somewhat higher income. On the other hand, the chances of risk are comparatively more than large-cap companies.

The mid-cap fund manager allocates funds to mid-cap companies for successful future growth.

  • Risk in Small-Cap Funds

The risk factor is the maximum compared to the large-cap and mid-cap funds, as small-cap companies are comparatively new in the businesses and are yet to establish them in the market. They have to face several challenges to remain in the competitive market.


In conclusion, we suggest that diversification of your portfolio is the best method of investing. You can consider putting your money in more than one mutual fund to diversify your portfolio, safeguard and earn fair returns. This would balance your risks that are in case one mutual fund does not perform well then your other funds may make up for the losses thus preserving the value of your portfolio.


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