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NSE categories
NSE or the National Stock Exchange is one of the largest stock exchanges in India. In fact it is the biggest in terms of daily trading and turn over. It is being speculated that the National Stock Exchange will surpass the Bombay Stock Exchange in terms of market capitalization within 2010. There are thousands of companies that are listed with the NSE and they are divided into different categories primarily depending on market capitalization.
Market capitalization is the primary factor for categorically dividing the listed stocks at the stock exchanges all over the world. Basically market capitalization is calculated by multiplying the present market price of the stock with the number of outstanding stocks in the market. While calculating the market capitalization of a company the bonds of that company at the debt market is considered as well. The market capitalization of a company is an indication of the financial position of the company. It also gives an idea of the fact that how big is the company.
Primarily the stocks that are listed in the National Stock Exchange are divided into three different categories on the basis of the market capitalization – large cap, mid cap and the small cap. There are certain criteria that are decided by the NSE authorities to determine which stocks will fall in the large cap segment and which one will come under the small cap category.
Large Cap Stocks – These are stocks that represent the biggest and most reputed companies among all the listed companies in the stock exchange. Generally the companies that have a market capitalization of more than $ 10 billion are considered to have a large market capitalization. The stocks of these companies are categorized as the large cap stocks. At NSE as well companies with the large market capital is labeled as the large cap stocks. The large cap companies are mostly the companies that are in business for years and making significant growth in terms of profit and asset accumulation. This is primarily the reason that the large cap stocks are considered for including in the Nifty that is the prime index of the National Stock Exchange.
Mid Cap Stocks – The mid size businesses with moderate market capitalization are considered to be mid cap companies. Generally those companies that have a market capital between $ 2 billion and $ 10 billion is considered to be mid cap companies. The stocks of these companies are categorized as the mid cap stocks. The mid cap stocks have great investment proposition as they have all the sign of rising in the market and give you good return on your investment.
Small Cap Stocks – Then there are of course the small cap companies that have small capital. Generally companies with a market capital between $ 200 million and $ 2 billion are said to be small cap companies and stocks of these companies are considered in the small cal segment. Mostly the small cap companies are relatively new companies that have got listed at the stock market. Investing in the small cap stocks are have more risk as these companies take too long to rise in the market. As these companies are relative new and you hardly have any resources to guess the potential of the company it is not wise to invest in these companies for long term. But you can invest in these companies and do some margin trading if you have definite and trustworthy tips.
Apart from these prominent stock categories in National Stock Exchange there are of course other categories like the Micro cap and the penny stocks. While the micro cap segment has companies with less than $ 300 million market capital, the penny stocks are low priced stocks. Besides the division that is made on the basis of the market capitalization, the stocks at the National Stock Exchange are also categorized on the basis of the sectors of the companies.
BSE categories
Bombay Stock Exchange or the BSE is the largest stock exchange in India in terms of highest number of companies listed with the stock exchange. If you consider the market capitalization of the companies listed with BSE even then the stock exchange is the largest in the country. There are thousands of companies listed at the stock exchange and they are divided into different categories depending on various factors including market capitalization, parameters set by the Securities and Exchange Board of India or the SEBI, number of years of listing at the exchange, equity capital of the company, liquidity of the company and so many other factors.
Market capitalization of the company is a determining factor for dividing the stocks in different groups. Market capitalization of a company is calculated by multiplying the number of outstanding stocks of the company at the market with the current price of the stock at the market. Along with that the bonds at the debt market of the company are also taken into consideration. Depending on the market capitalization stocks are divided mainly into three categories – the large cap stocks, mid cap stocks and the small cap stocks. Generally the biggest companies with a market capital of more than $10 billion are considered to be large cap stocks. The range for determining the mid cap stocks is between $ 2 billion to $ 10 billion. Companies that have a market capitalization of the less than $ 2 billion are grouped under the small cap stocks.
Securities and Exchange Board of India is the governing body for all the stock exchanges in India and they frame the rules and regulations for the stock exchanges. Starting right from the listing of the companies, issuing of securities, trading of stocks at the stock market, everything is controlled by the Securities and Exchange Board of India or SEBI. Based on the guideline and parameters of trading by the SEBI authorities, the stocks listed at the BSE are divided. That means there are different trading guidelines and rules for each of the categories of stocks listed at the Bombay Stock Exchange.
Other factors like the number of years of listing of the company are considered for determining the authenticity of the company and the business potential of the company. The equity capital of the company and the asset of the companies are also considered for examining the financial potential of the company. When a company applies for listing at the Bombay Stock Exchange they have to fulfill all the set conditions and then the BSE authority carries out a due diligence to examine the company. After that depending on the parameters of the categorization the company is listed at the appropriate group. Often times listed stocks are rearranged by the BSE. That is the group or the category of the stocks is changed on the basis of the parameters that are set for determining the category of the stock. Here we are presenting the existing groups or categories in which the BSE stocks are divided.
Primarily there are five groups in which the listed stocks are divided and they are A, B, T, Z, and F. The ‘A’ group comprises stocks that have fairly good growth rate. These companies offer dividend to the investors and have good capital appreciation over the time. The stocks that are listed with ‘A’ category have the facility to carry forward to the next settlement cycle. This is an advantage from the margin and derivative trading point of view. The category ‘B’ is basically a subset of all the listed stocks and the stocks listed in this category have greater market capitalization that the rest of the stocks. The trading of the stocks that are listed in the ‘T’ category needs to be settled on the very trading day and the deals can not be carried forward. This is done by BSE to restrict any unwanted movement in these scripts. The stocks in the ‘Z’ group are marked for not complying with the rules and regulations of the stock exchange and these stocks are often suspended from trading. The ‘F’ group is reserved for the stocks listed at the debt market.
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