What is Market Capitalization: it is the value of total outstanding stocks priced at market value. Which mean current market price of any share multiplied by total shares which were issues to public.
There are normally three pricing of any share.
- Face value: This is value of share when IPO is launched.
- Book Value: This is the accounting value after an year. Normally, if companies make profit book value may increase due to increase in assets of the company.
- Market Value: It is the current market price of any company at which you can trade the share.
Formula for calculating Market Capitalization
Market Capitalization = Current Market Price X total outstanding share
Free Floated Market Capitalization = Current Market Price X Free floated shares
Free Floated share means excluding the promoter equity, holdings through FDI Route, Holdings by private corporate, and holdings by Employee Welfare Funds in total outstanding shares.
Both NIFTY and SENSEX take Free Float Market Capitalization into account while calculating the index.