NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks
In the context of equity share investing, what does the 'free float' of a listed company represent?
Free float is the part of a company's issued shares that is readily available for trading by the public. It excludes promoter and associate holdings, strategic holdings and locked-in shares. Index providers use free float to weight stocks so that only tradable shares affect the index.
- AShares held by promoters and their associates
- BShares readily available for trading by the public, excluding locked-in and promoter holdingsCorrect
- CTotal shares issued including those held by the government
- DShares that have been bought back and extinguished
Explanation
Free float is the portion of issued shares that is available for trading in the market. It excludes promoter holdings, strategic holdings and locked-in shares. Promoter holdings are the opposite of free float, so option A is wrong.
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