Fundamental Analysis

Start Investing Courses Calculators Start Investing Courses Calculators Your Investment Journey Starts Here For those who think long-term, act deliberately, and want their money to reflect their vision. You already understand that earning money is just the beginning. What defines wealth in the modern world isn’t how much you make, it’s how intentionally you grow and protect it. This is your invitation to start investing not just with tools and tickers, but with thought, clarity, and a plan that reflects who you are and what you want from life. Whether you’re a first-generation wealth builder or a curious professional exploring new asset classes, this guide isn’t about noisy tips or market timing. It’s about building a strong, intelligent foundation. Why Investing Is Non-Negotiable (Even If You’re “Comfortable”) Capital is no longer passive. In a world where inflation quietly chips away at your savings, investing is the only active defense and your most powerful offense. If you’re parking your wealth in traditional savings or fixed deposits, you’re accepting suboptimal growth. If you’re waiting for “the right time,” you’re likely leaving years of compounding on the table. Smart investing isn’t about chasing the market. It’s about aligning your money with your values, goals, and time horizon. Your Wealth Architecture: How to Think About Investing Here’s how the intelligent investor views their capital: 🧭 Purpose-Driven: Every investment is aligned to a life objective, be it early retirement, second income, a child’s education, or funding a venture. 📈 Strategic, Not Sporadic: A portfolio is thoughtfully built across asset classes, not assembled from tips or trends. ⏳ Optimized for Time: Compounding is not a concept, it’s the engine. And time is the most precious input. 🧠 Risk-Aware, Not Risk-Averse: True investors don’t avoid volatility. They prepare for it and use it intelligently. Before You Invest: Questions Worth Asking Let’s pause the ‘how-to’ and reflect on the ‘why’. Ask yourself: What am I building this capital for: security, freedom, legacy? When will I need access to this wealth? Am I looking for growth, income, or preservation? Do I truly understand the risk I’m taking, and is it worth the reward? Answering these transforms investing from a transaction into a philosophy. Step Zero: Get Your Infrastructure Right 1. Open a Demat & Investment Account Choose a reliable platform not for its hype, but for its infrastructure, transparency, and ease of long-term execution. Recommended for serious investors: Open you Zerodha account now 2. Have a Clear Asset Allocation Framework How much in equities? How much in debt? What about gold or global exposure? This is your blueprint, not something you “figure out later.” Building Blocks: What the Modern Investor Should Own 📌 Mutual Funds (For Delegated Discipline) Ideal for those who want market exposure without the pressure of constant tracking. Choose actively managed funds for mid/small cap plays; choose index funds for cost-efficiency and predictability. Balanced Advantage – For navigating volatile markets Multi-cap/Flexi-cap – For broad-based, long-term growth ELSS – Tax efficiency 📌 Direct Equity (For the Research-Inclined) Build a concentrated portfolio of 10–15 businesses you deeply understand. Long-term wealth isn’t built through trading, but through conviction in quality. Use fundamental filters: Consistent cash flows Competitive moat Prudent capital allocation Clean corporate governance To invest directly in quality stocks, you’ll need a trusted Demat account Open you Zerodha account now If you can’t hold it for atleast 5 years, don’t buy it today. What Smart Investors Avoid (That Everyone Else Falls For) Over-diversification that dilutes returns without adding safety Blind SIPs without reviewing fund performance or alignment Emotional exits during corrections — the costliest mistakes aren’t made in crashes, but in panic The Golden Framework: What Makes a Portfolio Enduring Conviction – Invest in what you understand. Build trust with the process, not just the product. Clarity – You don’t need 50 instruments. You need 5 that do the job well. Consistency – Wealth isn’t built overnight. It’s built every month, silently, in the background, while you live your life. Final Word: Investing Is Personal, But Never Random There’s no “one-size-fits-all.” However, there is a way to make investing your own, strategic, conscious, and aligned with your goals. Wealth isn’t what you show. It’s what silently works for you when you’re asleep, on vacation, or building something bigger than yourself. Get Started with Zerodha Today! Frequently Asked Questions Do I need a lot of money to start investing? Not at all. You can begin with as little as ₹100/month to ₹500/month via SIPs or ETFs. What matters more is consistency and time, not size. Is Zerodha safe and beginner-friendly? Yes. Zerodha is India’s most trusted discount broker, known for its transparency, low costs, and intuitive platform. Why do I need a Demat account to invest? A Demat account is where your shares and ETFs are held securely — just like a bank account holds your money. How is AssetYogi different from other financial content creators? We don’t just create videos — we guide you with researched portfolios, stock picks, expert sessions, and now with tools via our app VIDFIN. What is VIDFIN and how is it connected to AssetYogi? VIDFIN is our app that complements our content. It offers video-based financial courses, stock & IPO recommendations, and planning tools — all created by the AssetYogi team. Can I trust the investment advice on AssetYogi or VIDFIN? We don’t give stock tips. We offer research-backed recommendations, long-term insights, and tools to help you make informed decisions. Get Started with Zerodha Today! Typical Portfolio Allocation Equity Debt Gold Real Estate Other Assets Empowering you with clear, actionable financial knowledge for a secure future. Quick Links Home About Us Articles Real Estate Guides YouTube Channel Instagram Old Calculator Old Blog New Calculator New Blog Legal & Contact Privacy Policy Terms & Conditions Contact Us © 2025 AssetYogi & VidFin. All rights reserved. Need a Demat Account? Zerodha is our recommendation. Open account in 5 min →

Do you also scratch your head when you hear terms like Nifty or Sensex? Don’t worry, you are not alone.  These stock market indices are everywhere in finance reels or headlines — but what is index in stock market? Think of a stock market index as a barometer that reflects the performance of a group of stocks. Knowing this helps investors understand market trends and make better investment decisions.  This blog will simplify it all, from covering the types of index in stock market, how they are formed and why they’re important for tracking market performance. What is Index in Stock Market A stock market index is basically a statistical measure that represents the performance of a specific group of stocks. They provide information on whether that specific group of stock is going up, down, or staying steady. These indices represent a specific group of companies and are selected based on a few factors like their size (market capitalization), trading volume, the sector they belong to—such as banking, IT, energy and so on or how often their shares are traded. Investors use such indices to understand how the market is performing and to see if their own investments are doing better or worse than the average.   For example, the Nifty 50 index includes 50 of the largest and most actively traded companies listed on the National Stock Exchange (NSE) whereas the Sensex 30 covers 30 top companies that are listed on the Bombay Stock Exchange (BSE).  Importance of a Stock Market Index Stock market indices are much more than just the  numbers flashing on your screen.They play an important role in how the entire stock market functions. 1. Benchmarking the PerformanceYou invested in a few stocks. Then how will you know if your investments are doing well or are they underperforming? Here indices come into play. Investors use them as a benchmark to measure their own portfolio’s performance.  For example, if the Nifty 50 rose by 10% in a year and your portfolio gave 12%, then you’d done better than the market. 2. Reading Market MoodIndices are like a market mood tracker.. When the Sensex or Nifty is rising, it means overall investor sentiment is positive. If they’re falling, it may signal worry or fear or confusion among investors. So indices help understand what the broader market is feeling right now. 3. Helping in Investment ChoicesThere are sector specific stock market indices too like Nifty Bank, Nifty IT, etc. If a particular sector index is doing well consistently, it may guide other investors to explore opportunities in that particular sector. So indices help an investor in deciding where to invest. Used to Create Investment Products Many mutual funds and ETFs (Exchange-Traded Funds) are designed to mirror the performance of an index. For example, a Nifty 50 Index Fund will invest in the same 50 companies that make up the index. This makes it easy for investors to get broad exposure to the market without selecting individual stocks. Types of Stock Market Indices The Indian stock market comprises various indices each serving a distinct purpose. Let’s take a look:​ 1. Benchmark Indices Nifty 50: Represents 50 large-cap stocks listed on the National Stock Exchange (NSE). These companies are from various sectors like FMCG, banking, IT, and energy. This index gives a broad picture of the Indian economy. When someone says “Nifty is up today,” it means that the average value of these top 50 companies has increased, reflecting positive market sentiment. BSE Sensex:​ The Sensex (short for Sensitive Index) tracks 30 companies that are the most established and financially sound,listed on the Bombay Stock Exchange (BSE). These 30 companies are considered as leaders in their respective industries and their selection is based on their market capitalization and liquidity. Like the Nifty, the Sensex acts as a pulse of the Indian stock market so when the Sensex rises or falls, it indicates the general direction of the market. These 2 are the most popular indices in the Indian stock market. These indices provide a snapshot of the overall market performance.​ 2. Sectoral Indices These indices focus on specific sectors:​ Nifty Bank: This index includes India’s top banking sector stocks which are listed on the NSE, such as HDFC Bank, ICICI Bank and SBI. This index reflects the overall performance of India’s banking industry. So, if Nifty Bank is rising, it usually means banking stocks in India are doing well. Nifty IT: This index tracks India’s biggest and most influential information technology companies like Infosys, TCS and Wipro. It helps investors in understanding how the tech sector is performing, especially during times of global digital demand. Nifty Pharma: ​This index includes prominent pharmaceutical companies such as Sun Pharma, Dr. Reddy’s and Cipla. It shows how the pharma industry in India is moving. This index becomes most relevant during health-related global events or policy changes. Such sectoral indices help investors in assessing the performance of particular industries.​ 3. Market Capitalization-Based Indices These indices categorize companies based on their market capitalization:​ Nifty Midcap 100: This index tracks the performance of 100 mid-sized companies that are listed on the NSE. These firms are usually larger than small-caps but smaller than large-caps. Examples include companies like Max Healthcare or Bharat Forge. Investors often look at this index to find companies with high growth potential and slightly lower risk than small-caps. Nifty Smallcap 100: This index represents 100 smaller companies that have lower market capitalization. These companies are often emerging businesses or niche players. While small-caps can offer high returns, they also carry higher risk due to lower liquidity and high price volatility. Market capitalization based indices helps investors in understanding the performance of different segments of the market.   Thematic Indices These indices focus on specific investment themes or market trends: Nifty Next 50: This index includes those 50 companies that are ranked just below the Nifty 50 in terms of market capitalization. These companies are often seen as the one “next in line” that

Your salary just got credited, and after covering all your expenses, you are left with a decent amount. Now, you’re wondering: What should I do with this money? Where should I invest this amount? Should I opt for mutual funds or go for stocks? This is a common dilemma for many of us in India — should you invest in mutual funds or stocks, and which one offers better returns in the long run? Both have their pros and cons. In this blog, we’ll break it all down from understanding stock vs mutual funds, their key differences, pros & cons and which is a better investment. Mutual Funds vs Stocks What are Stocks? Stocks represent ownership in a company. When you purchase a company’s stock, you acquire a share of that company, thus making you a shareholder. Your returns come from the company’s profits, either through dividends or via capital appreciation. What are Mutual Funds? Mutual funds pool money from multiple investors and invest them in a diversified portfolio of assets, including stocks, bonds or other securities like government bonds. These funds are managed by professional fund managers who make investment decisions on behalf of the investors. There are two ways to invest in mutual funds: SIP (Systematic Investment Plan) – Iinvest a fixed amount regularly (e.g., monthly). For Example: You Invest ₹5,000 every month into an equity mutual fund like HDFC Flexi Cap Fund for 5 years. Lump Sum – Invest a large amount at once. For Example: You invest ₹2,00,000 at once in ICICI Prudential Bluechip Fund and let it grow over time. Key Differences Between Mutual Funds and Stocks     Feature Mutual Funds Stocks Management Professionally managed Self-managed Diversification High (invests in multiple assets) Low (individual company risk) Risk Moderate (due to diversification) High (subject to market volatility) Returns Moderate and steady Potentially high but unpredictable Investment Knowledge Minimal required High (requires market analysis and research) Liquidity High High Control Limited (fund manager decides) Full control over investment decisions Pros and Cons Mutual Funds Pros: Managed by a professional fund manager A diversified portfolio thus reduces risk Suitable for beginners Systematic Investment Plans (SIPs) allow disciplined investing Cons: Management fees and expenses to be paid to the fund manager. Less control over individual investments. Returns may be lower compared to stocks   Stocks Pros: Potential for high returns.. Full control over investment choices Dividends provide regular income. Cons: High risk due to market volatility. Requires in-depth market knowledge and research. Emotional decision-making can lead to losses​.   How to choose the Right Mutual Fund or Stock? Mutual Funds: Start with your goalWish to buy a house in 5 years? Planning for your retirement? Want to send your child abroad for education? Choose a fund based on your timeline — short, medium, or long-term. Know your risk appetiteIf you’re cautious and not a risk taker then debt or hybrid funds are safer. If you can take more risk for higher returns than equity mutual funds may suit you. Pick the right type of fund Equity funds if you want to create long-term wealth Debt funds for stability and lower risk Hybrid funds for a mix of both Check fund’s performanceLook for consistency in the fund. Don’t go for flashy one-year returns. See how the fund performed in up and down markets. Compare fees (expense ratio) Lower expense ratios can mean more returns in your pocket over time. Research the fund manager’s track record A good fund manager = better fund handling during market ups and downs. Stocks: Do fundamental analysisStudy the company’s profits, growth, debt and market position. Example: If you’re eyeing Tata Motors, check their revenue, EV plans, and check their competitors. Understand broader market trendsAre interest rates rising? Is the economy growing? Can the global crisis affect the market? These factors can affect stock performance so understand them. Diversification Don’t put all your money into one stock or sector. Go for multiple sectors like banking, tech, auto, pharma, etc., to manage risk. Stay updatedFollow the company announcements, earnings reports and news that might impact their business and your money Learn before you reap If you’re a beginner, consider taking structured lessons like VIDFIN’s Stock Market Essentials course. It helps you build a strong base in picking quality stocks and avoiding common mistakes. Mutual Funds vs Stocks: Which Is Better for Investment? If you are also confused between these two investment options then it’s important to understand their differences and align them as per your financial goals.  Mutual Funds Diversification: Mutual funds offer instant diversification by pooling money from many investors. You have exposure to a mix of stocks, bonds or other securities without picking them individually. Professional Management: A fund manager makes investment decisions on your behalf. Their goal is to minimize risk while meeting the fund’s objective. Risk and Return: These usually involve moderate risk, lower than direct stock investments. Returns vary based on the fund’s performance and market conditions. Cost and Tax Benefits: Lower Costs: Most mutual funds charge relatively low fees. Tax Benefits: Certain funds like ELSS (Equity-Linked Saving Scheme) are eligible for deductions under Section 80C. Stocks Ownership: Buying stocks means owning a part of a company, becoming an owner. You become a shareholder with voting rights and a share in the profits of the company. High Risk, High Return: Stocks can be volatile and are generally considered high-risk investments. Offer the chance for higher returns than mutual funds. Direct Participation: You’re directly involved in the stock market. Returns come from both dividends and stock price appreciation. Diversification Challenge: For diversification in stocks, you need to invest in multiple companies (usually 15–20), which takes time, research, and effort.   Risk, Returns & Market Exposure When comparing mutual funds and stocks, it is important to understand how each performs in real market conditions. Let’s break this down with actual numbers and scenarios. Mutual Funds Mutual funds mostly aim for moderate and consistent returns by investing in a diversified mix of assets. 

Think about this, you’ve got ₹10,000 every month, a decent amount that you want to invest to grow your wealth. You’re scrolling through multiple apps like Groww or Zerodha, and a big question pops up: “Should I start a mutual fund SIP or try a stock SIP?” You check a SIP calculator, maybe even compare returns but the confusion remains. This moment is very common for beginner and even intermediate investors in India. Both investment options sound promising, but are difficult to choose which one fits your financial style and goals?   In this blog, you will understand everything — what a mutual fund SIP is, what a stock SIP is, their key features, differences, tax implications, factors to consider before choosing, comparison of their returns, and finally, which one might be better for you.  Mutual Fund SIP vs Stock SIP What is Mutual Fund SIP? A Mutual Fund SIP (Systematic Investment Plan) is a way of investing a certain amount of money regularly into a mutual fund. Instead of investing a lump sum all at once, you have to invest small amounts at regular intervals, such as monthly. The fund manager then invests this money across a range of stocks or bonds, thus helping to diversify your risk. You don’t need to pick individual stocks yourself, making it a hands-off investment. The number of units you will receive is determined by the NAV (Net Asset Value), which fluctuates based on the fund’s performance. This approach is great for people who want to invest consistently without having to actively manage their investments. Features: Automated Monthly Investing: Your money is invested automatically at a fixed interval, saving your time and effort. Professionally Managed: A fund manager takes care of your money so that you don’t have to. Ideal for Long-Term Wealth Building: SIPs work best for long-term goals like retirement or buying a home. Wide Range of Options: Choose from a pool of options like equity, hybrid, or debt funds based on your goals. What is Stock SIP? You want to invest in stocks of specific companies like Reliance or TCS that’s what Stock SIP is all about. It allows you to buy individual stocks regularly, just like a traditional SIP, but this time, you’re the one in control of picking which stocks you want to invest your money in. Apps like Groww, Zerodha, and Upstox offer this feature, making it easier for investors to buy shares over time. Features: Buy Shares Regularly: Invest in individual stocks at regular intervals, without worrying about the market’s ups and downs. Control Over Selection: You have the freedom to choose which stocks to invest in. Potential for Higher Returns: Stock SIPs can yield higher returns, especially if you choose the right stocks. No Fund Manager: Unlike mutual funds, there is no manager, you’re responsible for picking stocks. Key Differences: Mutual Fund SIP vs Stock SIP Feature Mutual Fund SIP Stock SIP Management Fund manager Self-managed Risk Level Lower (diversification) Higher (concentrated) Return Potential Moderate and steady High but risky Best For Beginners & passive investors Active investors & stock pickers Tax Implications Whether you invest through a Mutual Fund SIP or a Stock SIP, you’ll need to pay taxes on the profits when you sell no matter what. So let’s understand the tax implications. Mutual Fund SIPs: Equity Mutual Funds: STCG: If fund units sold within 1 year, gains taxed at 20%. LTCG: If held for more than 1 year, gains above ₹1 lakh taxed at 12.5% Debt Mutual Funds:  Purchased on or after April 1, 2023: Gains are taxed as per your income tax slab rate. Purchased before April 1, 2023: Held for up to 24 months: Taxed as STCG, based on your income slab Held for more than 24 months: Taxed at 12.5%, considered as LTCG (with no indexation). For Stock SIPs:   STCG (Short-Term Capital Gains): Stocks sold within 1 year, gains taxed at 20%. LTCG (Long-Term Capital Gains): Stocks held for more than 1 year and gains exceeding ₹1.25 lakh taxed at 12.5% (no indexation benefit as per Budget 2024). STT (Securities Transaction Tax): This tax is applied on every buy and sell of equity shares. It’s auto-deducted and does not affect capital gains calculation directly, but it adds to your transaction cost. What Should You Consider Before Choosing? Ask yourself these questions to make the right decision: 1. What’s Your Risk Appetite? Prefer safety & stable returns → Mutual Fund SIP Willing to take higher risk for higher reward → Stock SIP 2. How Much Time Can You Give? Don’t have time to track markets → Mutual Fund SIP Love following markets, reading reports → Stock SIP 3. How Confident Are You About Stock Selection? Not sure where to begin? → Stick to mutual funds Want to learn stock picking? → Consider learning through Vidfin’s Fundamental Analysis course 4. What Are Your Investment Goals? Long-term, hassle-free growth → Mutual Funds More aggressive wealth building → Stocks   Stock SIP Returns vs Mutual Fund SIP Returns Imagine you started a Stock SIP in January 2024, investing ₹10,000 every month. Over 4 years, this amount becomes ₹4.8 lakhs. If you had picked high-performing stocks like Tata Motors or Trent, which delivered around 40-50% annualized returns, your investment could have grown to approximately ₹8.5–9.5 lakhs (depending on market timing and consistency). Let’s calculate the post tax amount: Investment: ₹10,000/month for 4 years = ₹4.8 lakhsEstimated return: 40–50% CAGRMaturity value: ₹9–10 lakhs (before tax)Tax: LTCG tax at 12.5% on gains above ₹1.25 lakh Total Gain = ₹9.5 lakhs (final value) – ₹4.8 lakhs (invested) = ₹4.7 lakhs Taxable gain = ₹4.7L – ₹1.25L = ₹3.45L Tax = 12.5% of ₹3.45L = ₹43,125 Post-tax Value: ₹9.5 lakhs – ₹43,125 = ~₹9.06 lakhs   Now compare that with a Mutual Fund SIP in a Nifty 50 index fund, which returned 18–20% CAGR over the same period. Your ₹4.8 lakhs here would grow to about ₹7.2–7.6 lakhs, with much lower volatility and no need to

Investors often ask, “What are The Factors Affecting Stock Market Performance?” Multiple factors are responsible for shaping investor sentiment and driving share price movements, influencing stock market performance.  Understanding and analyzing these factors in depth can help traders, investors, and research analysts make informed investing decisions. This article explores key drivers impacting stock prices and overall stock market trends, from sentiment and economic indicators to geopolitical events. Factors Affecting Stock Market Performance Here’s a snapshot of different factors and their impact on the stock market performance: Performance Factor Impact Interest Rates High rates slow growth Low rates boost stocks Inflation High inflation can erode profits GDP Growth Strong GDP is supportive of market growth Corporate Earnings Increasing profits yields increase in stock prices Market Sentiment Market sentiment among investors dictates market trends Geopolitical Events Wars, trade policies, and elections create volatility Government Policies Changes in taxation policies and regulations impact businesses Currency Strength Impacts exports, imports, and foreign investment Commodity Prices Oil, gold, and metal prices influence stock market performance in both good and bad ways. Different Factors Affecting Stock Market Performance Several factors ranging from macroeconomic to stock-specific events affect the share price and stock market performance respectively. The considerable factors are discussed below. 1. Interest Rates and Monetary Policy The central bank of different countries implements interest rates and monetary policy. The monetary policy affects the stock market performance in the following manner. 2. Inflation and Deflation   Factor Affect on Stock Market Performance Inflation Higher inflation erodes purchasing power, leading to reduced corporate earnings. This creates a market slowdown and thereby hinders stock market performance.Moderate inflation indicates a growing economy and can be beneficial.The Stock Market remains bearish. Deflation Deflation (falling prices) signals economic distress, reducing investor confidence in the stock market.Stock Market growth remains slow   3. GDP Growth and Economic Indicators If GDP increases it reflects a country’s growing economy given an increase in corporate earnings. It also boosts the investor’s confidence in the stock market.   Factor Affect on Stock Market Performance Unemployment Rate Higher unemployment weakens consumption demand and in turn corporate profits. It causes the stock market to stay bearish. Manufacturing & Services Index (PMI) A strong PMI signals economic expansionStock Market usually goes up. Consumer Spending Higher spending by consumers leads to increased company revenues.It leads to a Stock market boom.   4. Corporate Earnings and Financial Performance Stock market performance depends upon the financial health of a company. Investors consider the following financial parameters to determine the performance of a company. 5. Market Sentiment and Investor Behavior Market sentiment often governs the market direction and perception among investors. A positive market sentiment boosts investor confidence and results in a bull run and vice versa. 6. Supply and Demand The fluctuation in the prices of stock often happens due to supply and demand variations. A higher demand among market participants increases the price while an increase in supply may lead to falling prices. External Factors Affecting Stock Market Performance 7. Geopolitical Events and Global Markets Geopolitical events like wars, government instability, regime change, elections, and terrorism also adversely affect the stock market performance. For example: 8. Government Policies and Regulations Government policies like tax implications, subsidies for business, etc tend to affect the stock market performance in either way depending on whether it is beneficial or not for the company and business. For Example: 9. Currency Fluctuations and Foreign Investment Currency fluctuations especially those of emerging markets like India have a significant impact on the stock market as they dictate foreign investments. High foreign investments are positive for the stock market while a decrease negatively impacts the stock market performance. 10. Commodity Prices (Oil, Gold, and Metals) Fluctuations in oil and gold prices affect industries and stock indices: Factor Affect on Stock Market Performance Oil Price High oil prices increase operational costs for airlines and logistics companies.Stocks of oil-dependent companies may suffer.  Gold Price Gold prices rise during uncertainty such as COVID-19, leading to investment shifts from equities to precious metals.The outflow of funds can lead to a bearish market. Final Thoughts The performance of the stock market is dependent on a variety of factors that have their contribution. While some factors have a small impact others can be big enough to stimulate a bear or bull market. Considering these factors before investing in stocks can prevent the downside associated with the stock market.  FAQ What factors affect the stock market? Different factors like government policies, supply-demand, and geopolitical events tend to affect the stock market positively and negatively. What affects the stock market the most? On a fundamental level, the factor of supply and demand is what affects the market most. Supply and demand are responsible for creating the fluctuations in the share prices of a company. What are the risk factors of the stock market? The financial risk factors include financial stability, fluctuation, and volatility, etc. These risk factors if on the negative side can drastically depreciate the share price of any company. What kind of news affects the stock market? Different types of news affect the stock market in small or big capacities. News like mergers and acquisitions, and the release of new products can have a major impact on individual stocks.

Market capitalisation generally called the market cap of a company can be understood as the total market value of the company. Market capitalization is used by investors all over the world to evaluate companies before buying their shares. There are three major types of market capitalization which are large cap, small cap, and mid cap. How Market Capitalization is Calculated? The formula for calculating the market capitalization of a company is given below Market capitalization = Current Share Price * Total outstanding shares For example, if a company has 10 crore outstanding shares, and each share is priced at ₹50, the market cap would be: 10,00,00,000 × 50 = ₹500 Crore (Market cap) The figure obtained represents the market value of a company. It helps in comparing companies with their peers and identifying potential investment opportunities. Categories of Market Capitalization Companies in the stock market are often classified based on their market cap into three categories: Market Capitalization Category Market Capitalization Range Characteristics Large Cap Above ₹28,000 Cr Very Stable, Bluechip Companies, Safe to invest Mid Cap Between 8,500 and 28,000 Cr Emerging companies, riskier than large-cap, the potential for growth Small Cap Less than ₹8,500 Cr Highly risky, high growth potential, small and relatively newer companies  1. Large-Cap Stocks Large-cap companies are often the market leaders in their sector or industry segment. Examples of large caps include blue-chip stocks like Reliance, HDFC Bank, and Infosys. Investors who are looking for stable returns and long-term growth often prefer to invest their money in large-cap stocks. 2. Mid-Cap Stocks Mid-cap stocks are the companies that have a market cap somewhere between 8,500 and 28,000 Crore. These have generally shown significant growth but still have enough room for expansion. They come with slightly more risk factors. Example: Castrol and Jubilant Food. 3. Small-Cap Stocks Small-cap stocks include companies having a market capitalization lesser than ₹8,500 Crore. They are the riskiest of the lot. But they also tend to have the highest growth potential shortly. Example: Bombay Dyeing and Godavari Power. Importance of Market Capitalization Market capitalization plays a significant role in shaping investment strategies. Here are some reasons: Risk Assessment From a risk point of view, market cap becomes important. It tells which companies are less or more prone to risk based on their market cap. Large-cap companies are the least risky followed by mid-cap and small-cap. Diversification Strategy A diversified and balanced portfolio containing stocks of companies with different market caps allows one to take advantage of each market cap category. Liquidity Consideration Market capitalization is an important factor when it comes to assessing liquidity. Often low market cap companies or penny stocks do not offer the required liquidity for investing confidently without the fear of being stuck. Growth Potential Market cap can very well tell the growth potential of companies. Large-cap companies have already seen the maximum expansion phase while mid-cap and small-cap companies offer a high growth potential and therefore returns. Limitations of Market Capitalization While market cap is handsome down a very useful indicator, it comes with certain limitations: Does Not Reflect Debt Levels: Market capitalization ignores the debt level of a company. It poses a limitation as a company with high market capitalization can also be under a high debt level. This would make it an unfavorable investment despite having good market capitalization. Ignore Profitability: Market capitalization does not take into consideration the profitability factor. Often companies with a very high market cap can have none to very low profit as in the case of some modern startups. Market Fluctuations Impact Valuation: Due to sudden fluctuations in the share price the market cap can take a severe hit. The market cap can drop significantly while the company tends to do well. Financial Metrics to Consider Alongside Market Cap To make well-informed investment decisions, investors should also analyze other financial metrics along with market capitalization: Price-to-Earnings (P/E) Ratio: It tells whether the market is ready to pay a higher or a lower price for a stock. Earnings Per Share (EPS): It is a measure of the company’s profitability. A higher EPS indicates the growth of the company. Debt-to-Equity Ratio: It helps in understanding how much debt a company has compared to its assets. A good debt-to-equity ratio is considered to be between 1 and 1.5. Revenue and Profit Margins: Analysing the revenue and profit margins is important as it can provide insight into the growth potential possible for a particular business. Final Thoughts Market capitalization is an essential tool to understand the market size and project the future growth potential of a company. But it has its limits. It therefore requires a combination of other financial metrics to get a crystal clear picture. If utilized in the right manner it can point out great investment opportunities that can prove to be even multi-baggers in the near to long term future. FAQ

If you are connected to the financial or business world, chances are you would have heard about exponential growth. This concept is generally used for representing an increase over a specific period.  A lot of professionals have been using exponential functions to comprehend variables in their studies, support diverse business decisions and discover factors that are influencing enough for a gamut of data. However, before anything else, it is essential to understand how such an increase can occur exponentially, especially if you are working in a certain industry that repeatedly depends upon statistical information.  In this post, let’s explore the meaning of exponential growth, who can use it, why it is essential and how it can be calculated with an example.  What is Exponential Growth? Exponential growth is referred to a data pattern that shows greater increases with time. Thus, it creates an upward trending curve on the graph, known as the exponential growth curve.  In the field of mathematics, when a function includes an exponent (or a power), the calculation will increase exponentially. For instance, if hens laid eggs thrice every year and tripled per year, in the second year, the number would be 27, and it will be 81 in the third year.  Understanding Exponential Growth In the world of finance, compound returns lead to exponential growth. The power of compounding is one of the powerful forces in this industry. This one concept lets investors create more considerable sums with minimal initial capital. One of the most common examples of exponential growth is market-linked investments carrying a compound interest rate. Your investments see exponential growth because of compound interest when you invest money in a market-linked investment option for an extended period. This shows how you grow your investment exponentially with minimal initial outlay. If the account offers a compound interest rate, you will get interested in the principal and the interest amount received from the preceding period. For instance, in the first year, you might get 8% interest on a bond with a face value of Rs.100  that matures in 30 years. Thus, you will get Rs.8.  In the following year, this 8% interest rate will be applied to Rs.108 and not Rs.100, keeping in mind the interest payment you received in the previous year. Hence, with every passing year, interest payments continue to amass and will be considered in the calculations of yearly interest payments by the time your financial instrument reaches maturity. Exponential Growth Formula On a graph or a chart, the exponential curve begins slowly. It remains closely flat for a time before swiftly increasing to become almost vertical. The exponential growth formula is as follows: V=S×(1+R)^T where,  S is the starting value  R is the rate of interest and  T is the elapsed number of periods Importance of Exponential Growth  Data that generally increases exponentially is vital for several careers. Apart from this, it is specifically essential in the following domains: Finance and accounting Business and data analytics Scientific studies Research and development Jotted down below are some additional (but equally important) value-added points of exponential growth: Encourages Technological Innovation A lot of applications in the information technology and computer science industries depend upon statistical information for growth analysis. When developing artificial intelligence processes, machine learning algorithms, and automated software, programmers and data scientists may calculate exponential increases in results over time for a specific input in an environment that is surrounded by digitization.  For example, if a developer uses a specific algorithm as an input to create outputs over a certain period, calculating the growth can help comprehend whether or not the increase in value is an exponential function. Assists Professionals in Discovering Trends Whether in finance and business, technology, science or health care, exponential increases in any sort of information can communicate growing trends. For example, clinical researchers might use this factor to graph an increase in positive health results with new medications. On the other hand, business leaders might also use this function to discover trends in consumer markets, costs of advertising and brand development. Evaluates Important Financial Metrics The accounting and financial industries generally depend upon growth functions to figure out return projections for specific periods. One of the metrics is a compound return. It is an investment return type that accumulates on starting investment principal and any growth the investment comes across.  When compound returns accumulate, your investment account increases exponentially every time there is an increase in the principal. Such an exponential increase can also occur with loans in case of the interest compounds over time and is at an adaptable rate.  Exponential Growth Uses Often, exponential growth is used in financial modelling. While the concept is quite common in a high-interest savings account, the interest rates do not fluctuate or waver as much during several economic situations. But, when keeping stocks in mind, returns aren’t as smooth as anticipated.  Not just that, the technology sector uses growth rate calculations, such as AI design, machine learning and software development. Moreover, researchers and scientists use mathematical concepts, like exponential growth, to experiment and study several data.  This factor helps in: Classifying factors and trends that can cause a multiplying increase in varying financial metrics, such as assets and liabilities, expenses, revenues, investments and compounding interest Overall, the models of exponential growth are beneficial in predicting the returns of an investment when the growth rate is consistent and doesn’t oscillate recurrently. Final Thoughts Regardless of the industry, it is evident that exponential growth is a highly essential factor that helps you draw conclusions to varying hypotheses. It does not just help financiers but scientists and IT personnel as well, among others. So, whenever you wish to take a huge business or investment decision regarding growth, make sure you consider the exponential growth formula and calculate it thoroughly.