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Answer Posted / simran
Under the 'full-market capitalization' methodology, the
total market capitalization of a company, irrespective of
who is holding the shares, is taken into consideration for
computation of an index. However, if instead of taking the
total market capitalization, only the Free-float market
capitalization of a company is considered for index
calculation, it is called the Free-float methodology. Free-
float market capitalization is defined as that proportion
of total shares issued by the company which are readily
available for trading in the market. It generally excludes
promoters' holding, government holding, strategic holding
and other locked-in shares, which will not come to the
market for trading in the normal course. Thus, the market
capitalization of each company in a Free-float index is
reduced to the extent of its Free-float available in the
market.
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