Float

Float (or free float) is the number of a company's shares that are available for trading by the general public. It excludes shares held by promoters, strategic investors, government entities, and any other locked-in or restricted shares. Float is a critical factor determining a stock's liquidity, price volatility, and index weightage.

In India, promoter holding is typically significant — unlike US markets where most large companies have 80-95% free float. For Indian Nifty 50 companies, promoter holdings vary widely: TCS has ~72% promoter holding (Tata Sons), leaving only ~28% float. HDFC Bank has ~26% promoter holding, leaving ~74% float. SBI has ~57.5% government holding with ~42.5% float. This variation significantly impacts how these stocks trade and their index weight.

The NSE's Nifty 50 and other indices use free-float market capitalisation methodology for weighting. This means a company's weight in the index is based on its free-float market cap (total market cap x free-float factor), not total market cap. Reliance Industries, despite being India's largest company by total market cap, has a lower Nifty weight than it would under full market cap methodology because promoter holding reduces its free float.

Low float stocks tend to be more volatile because a smaller pool of available shares means that even modest buying or selling pressure moves the price more. This is why small-cap stocks with high promoter holding (70-80%) can see extreme price swings — a few hundred crores of institutional buying can push such stocks up 10-20% in a week, and the reverse applies during selling.

SEBI mandates a minimum 25% public shareholding for all listed companies (10% for PSU companies listed after 2010). Companies below this threshold must bring their public holding to 25% through methods like offer for sale (OFS), bonus shares to existing public shareholders, or institutional placement programmes. This rule ensures minimum float and market liquidity for all listed companies.