Nifty has moved on to free float method for calculating the weights of the companies in the index. I just checked on investopedia for the definition of free-float methodology and this is what it says
Free-float methodology market capitalization is calculated by taking the equity's price and multiplying it by the number of shares readily available in the market. Instead of using all of the shares outstanding like the full-market capitalization method, the free-float method excludes locked-in shares such as those held by promoters and governments.
Calculated as:
And what was the impact of this?
"stocks that will lose their weightage in the index have seen sharp falls in share prices in the past few days," says a report from business line. It also points out that the selling is from the index funds who have to realign their portfolios based on the new weights assigned. Some of the companies that have lost weightage are NTPC, ONGC, Power Grid, SAIL and Bharti Airtel.
In general I think this is a move in the right direction for NSE and Nifty.
rk