NSE ADOPTS FREE FLOAT BASED INDEX from 26 June 2009

National Stock Exchange (NSE) will adopt the free-float market capitalization method to calculate its benchmark indices from 26 June 2009 from the existing full-float method. As a result, volatility may swell, as fund managers will realign their index funds portfolios to mirror changes in the benchmark. Weights of public sector undertakings - ONGC, NTPC, Sail, Power Grid Corporation and National Aluminum Company will come down by at least 50% with the index going free float.
Other stocks that will see a drop in weightage to this change in methodology include Bharti Airtel, Reliance Communications, Tata Consultancy Services, DLF and Wipro.
However, Infosys Technologies, ICICI Bank, Larsen and Toubro, HDFC and HDFC Bank will stand to gain from this change as their weights will almost double from their current levels.
Under the free-float market capitalization method, weights are assigned on the basis of floating stocks or open market shares of a company. On the other hand, under the full-float method, weights are decided on the total market capitalization of the company.