23 August 2008
Index is calculated on the basis of shares outstanding on a day to calculate the index of that day. You have to multiply the price of the day with the total outstanding shares and dividing this product.
Since all these shares are not available for trading, however it is suggested by many experts that the index calculated should not weigh the price with the total outstanding shares to compute the index number. Instead, it has been suggested from time to time that we should weigh it by the number of shares available for trading. This number is called the free float.
CAclubindia
