What method is used to calculate the Sensex and Nifty indices in India?

Solution

Free Float Market Capitalization Method is a method of calculating market capitalization that takes into account only the shares of a company that are freely available for trading in the market. In other words, it is a calculation of a company's total market value based on the number of shares that are actually available for trading in the open market, rather than all outstanding shares. The Free Float Method excludes shares that are held by promoters, governments, and strategic investors that are not available for trading in the market. This method is often used to reflect the true market value of a company's shares that are actively traded in the market, rather than the value of all outstanding shares. This method is commonly used to calculate the market capitalization of companies included in stock market indices such as the Sensex and Nifty in India.