Answer Posted / himanshu
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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