Free float in stocks

Subject : Economy

Section: Financial Market

Concept :

Recently, index provider MSCI said it has cut the free-float designations of four securities of India’s Adani group.

About Free Float:

The free float is also known as Public float which refers to the shares of a company that can be publicly traded and are not restricted.
It generally excludes promoters’ holding, government / strategic holding and other locked-in shares, which will not come to the market for trading in the normal course.
Free Float=(Outstanding shares-Restricted Shares-Closely held shares)
Outstanding shares refer to the number of shares held by all of the company’s shareholders
Restricted shares refer to shares that are not transferable until certain conditions are met. Restricted shares are generally held by corporate management, such as executives and directors.
Closely-held shares refer to shares that are typically held onto for a very long-term basis. Examples include major long-term shareholders and insiders.
Free Float Methodology is used to provide a more accurate reflection of market movements and stocks actively available for trading in the market.
The free-float methodology has been adopted by many of the world’s major indexes.

MSCI Index

MSCI is an acronym for Morgan Stanley Capital International.
It is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds.
MSCI calculates free float-adjusted market capitalization for each security to calculate the weights of the securities in the MSCI indexes.
It is calculated by multiplying an equity’s share price to number of shares available in the market.
Rather than using all of the shares (both active and inactive), the free float method excludes the locked in shares.
The MSCI India Index is designed to measure the performance of the large and midcap segments of the Indian market.
With 96 constituents, the index covers approximately 85% of the Indian equity universe. The MSCI India Index was launched on Apr 30, 1993.