Stock Market Basics : Free Float Market Capitalization

Market Capitalization which is also known as Market Cap is total market value of the company based on its current share price and the total number of outstanding stocks.

It is calculated by multiplying the current market price of the company's share with the total outstanding shares of the company.

Market Cap = Total Shares Outstanding x Stock Price

For example as on 8th Sep 2022, Total Shares of Reliance Industries Limited are 676.60 crores and Stock Price is ? 2585. Hence Market Capitalization is ?17,47,527 crores.

So What is Free Float Market Capitalization ?

While Market Capitalization considers total number of shares outstanding, in free float we only take into account publicly traded share holdings and multiply it with Stock Price. In other words, shares belonging to Promoters, Government owned for PSUs, Employee Welfare Trusts, Strategic Holding by Private Companies are ignored.

Now let us again take example of Reliance Industries Limited. Here, Free Float Market Capitalization is ?8,90,757.26 which we have arrived after deducting all privately owned shareholdings.