What Is Free-Float Market Cap?
Free-float market capitalisation is a version of market cap that counts only the shares actually available for public trading — excluding shares that are locked away and rarely traded.
What's excluded from free float
Free float strips out holdings that aren't available to the open market: promoter and promoter-group stakes, government holdings, strategic cross-holdings, and locked-in shares. What remains is the float that the investing public can actually buy and sell.
Why indices use it
Modern indices like the NIFTY 50 and SENSEX weight companies by free-float market cap, not total market cap. The logic: a company with a huge promoter stake but a small public float shouldn't dominate an index that's meant to reflect tradable market value. Free-float weighting gives a more realistic picture of the investable market.
Free float vs total market cap
Total market cap uses all shares; free-float uses only the public portion. A company with 75% promoter holding has a free float of just 25% of its shares — so its index weight is far smaller than its total market cap would suggest. The promoter/public split comes from the shareholding pattern.