As investors, we’re all aware of how companies are classified: large cap, mid cap, and small cap, based on their market cap. Market cap – short for market capitalisation – essentially points to how much a company is worth in the stock market. It’s like asking, “if someone were to buy the whole company, how much would it cost?” That number is calculated by multiplying a company’s total number of outstanding shares by its current market price per share.
So if a company has 1 crore shares in the market, and each share is worth ₹100 rupees, its market cap would be: 1 crore shares x ₹100 per share = ₹100 crores.
Market cap helps gauge a company’s size and value. The figure helps investors determine how big a company is, the risk involved, and which companies to compare with each other. Of all the companies listed on the bourses, the top 100 companies by market cap are classified as large caps, the companies ranked 101-250 make up the mid cap segment, and all companies ranked 251 onwards fall into the small cap category. Even though the terminology has been around for years, the actual distinction only came about quite recently, in 2017, defined by SEBI.
The rationale behind SEBI’s 2017 reforms and categorisation
In October 2017, India’s financial regulator, the Securities and Exchange Board of India (SEBI), introduced a landmark circular aimed at standardising mutual fund classifications, with the help of AMFI (Association of Mutual Funds of India). SEBI is the primary authority overseeing securities and mutual funds, ensuring investor protection through stringent regulations. AMFI is a self-regulatory body focused on standardising mutual fund practices and promoting investor awareness.
The circular required mutual fund (MF) schemes to be reclassified into broader categories based on their investment objectives and asset allocation. SEBI introduced a structured framework that grouped schemes into categories such as equity, debt, hybrid, and solution-oriented funds. The goal was to enhance and improve transparency, comparability, and understanding of mutual funds. By standardising the classification, SEBI aimed to simplify mutual fund offerings and help investors make more informed decisions
AMFI played a key role in implementing the SEBI circular by helping categorise companies based on market capitalisation—defining large-cap, mid-cap, and small-cap segments. Before this framework, MFs relied on their own internal definitions for these categories, resulting in inconsistencies and confusion for investors. This often led to misleading comparisons between schemes. SEBI’s objective was to bring uniformity, prevent mislabeling, and make it easier for investors to evaluate and compare funds accurately.
How it works: AMFI’s bi‑annual classification of companies
So how do we know where a company stands? If it has gained or lost value? AMFI does the work for us. Twice each year — typically in January and July — AMFI, in consultation with the major exchanges NSE, BSE and MSEI, publishes an official list. It ranks all listed companies by a 6-month average of their market capitalisation, with ranks 1-100 going to large cap, 101-250 to mid cap, and 251 and below to small cap.
The definition of large-cap, mid-cap and small-cap funds was standardised so that all equity funds could follow the same definition, and MF houses could adjust their portfolios based on these new definitions. (For example, a midcap fund must maintain ≥ 65% exposure in companies ranked 101–250, though up to 35% can span other capitalisation buckets).AMFI updates his list every six months based on data provided by the stock exchanges.
While these lists are useful for MFs to recalibrate and reposition their schemes to accommodate companies that have moved ranks, it is also useful for investors to understand how the markets — as well as certain sectors or companies — have moved.
How the markets have moved
While the definitions of large-cap, mid-cap and small-cap stocks have remained the same since 2018, the market dynamics have changed. As market valuations rise and fall, so do market caps.
In the first list brought out by AMFI in 2017, the company ranked 100 (smallest large‑cap) had a six‑month average market capitalisation of approximately ₹29,000 crore. The company ranked 250 (the smallest midcap) stood at around ₹8,500 crore.
Fast forward to the latest numbers from AMFI released in June 2025, and we can see that the smallest large cap company, ranked 100, stands at roughly ₹91,000 crore and the smallest mid cap company, ranked 250 stands at ₹30,000 crore.
AMFI-SEBI CUT-OFFS BASED ON MARKET CAP
So there has has been a broad shift since 2017, and the numbers throw up some interesting data:
- Equity markets have appreciated in a big way, fuelled by earnings, inflows from retail and institutional investors, and IPOs.
- Market cap thresholds have ballooned — from ₹8,500–₹29,000 crore in 2017 to ₹30,000–₹100,000 crore by 2025.
- There has been a re-ranking of companies. For example, some new-age startup IPOs like Zomato (Eternal), Nykaa, Paytm and PolicyBazaar, crossed the threshold and vaulted straight into large and midcap territory upon listing.
- The total market value of small‑cap stocks climbed from ₹17 lakh crore in 2017 to ₹92 lakh crore by the end‑2024, representing a five‑fold surge and a CAGR of 27.6%.
What next?
The 2017 reforms by SEBI and AMFI transformed a fragmented system into a transparent and more uniform classification framework. Today, fund categories and market cap cut-offs are clearly defined, thresholds automatically adapt over time, and investors can assess and compare funds and companies with confidence. So what could happen in the future? AMFI’s next reclassification list (due January 2026) might extend large‑cap thresholds further beyond ₹1 lakh crore, depending on market movements — we’ll just have to wait and watch.
Sources
SEBI: Categorization and Rationalization of Mutual Fund Schemes
AMFI: Categorization and Rationalization of Mutual Fund Schemes
AMFI: Categorization of Large Cap, Mid Cap and Small Cap Stocks
Moneycontrol: Sebi should widen definitions to increase number of large and midcap stocks
Economic Times: Smallcaps soar Rs 75 lak crore in value over 7 years growing 5x
PwC: Categorisation of mutual fund schemes, November 2017