Free Float Market Capitalization

Kingfisher: suppose has total 1 lakh shares: 30,000 held by Malya and rest 70 thousand held by general public. Value of each share in Bombay Stock Exchange (BSE) on 11 January 2012 is Rs. 150.

Now we first calculate a thing called “Free float Market capitalization” for Kingfisher, which is nothing but
= Number of shares held by general public multiplied with Value of Each share on the given date in Bombay Stock Exchange (BSE)= 70 thousand x 150
= 105 lakh rupees
So Kingfisher’s Free float Market cap (FFMC) for 11 January 2012= 105 lakh rupees.

Like this kingfisher, you pick up total 30 companies, calculate their FFMCs, add them together.This number becomes our  “Price of lifebuoy”, say it is 15 crore rupees. (NEW PRICE)

And total Free floating market cap of 30 companies, on that 1st april 1979 was say 10 lakh rupees. (OLD PRICE)

So as we saw earlier, INDEX= new price divided by old price (% value)

Now SENSEX = Total Free float market cap (FFMC) of 30 companies today divided by Total (FFMC) of 30 companies on 1st April 1979
=(15 crores / 10 lakh) x 100
=15000
This 15,000 my friends, is the today’s SENSEX.

SENSEX is calculated on 30 chosen companies. (Started in 1986)
NIFTY is calculated on 50 chosen companies. (Started in 1995)
Similarly BSE 100= calculated on 100 companies, since 1989.