Free float is the portion of a company’s shares that are freely available for trading in the open market — excluding promoter holdings, government stakes, strategic investors, ESOP trusts, and locked-in shares.
Formula: Free-float % = (Shares outstanding − Locked/Promoter/Strategic) ÷ Shares outstanding × 100
INR example: Reliance Industries has ~50.3% promoter holding, so its free float is ~49.7%. Free-float market cap = Total market cap × free-float factor. Nifty 50 and Sensex are free-float weighted indices — only the tradable portion counts toward index weight.
When to use: When comparing index weights, liquidity, or eligibility for benchmark inclusion. Higher free float = better liquidity, lower impact cost. Stocks with very low free float (< 10%) face liquidity constraints and higher price volatility.
SEBI note: SEBI requires minimum 25% public shareholding for continued listing (Rule 19A of SCRR). Government-owned companies have a 25% MPS target.
Related terms: FPI (Foreign Portfolio Investor), P/E Ratio, Index Fund.