How is my average rate calculated for equity?
First In First Out (FIFO) is a method used while selling stocks and calculating your average rate. Under this method, securities purchased first are sold first.
For example, Mr Raj bought and sold ITC shares as given below:
Note that the average is calculated for delivery products (Cash, BTST & MTF) together; all delivery products follow a single FIFO calculation.
| Date | Buy/Sell | Qty | Rate | Value |
|---|---|---|---|---|
| Jan 1st | Buy | 1,000 | Rs.100 per share | Rs. 1,00,000 |
| June 1st | Buy | 1,000 | Rs.120 per share | Rs. 1,20,000 |
| Total | 2,000 | Avg: Rs.110 (2,20,000 /2,000) | Rs. 2,20,000 |
- On July 31st, he sells 400 shares at Rs.170 per share:
| Date | Buy/Sell | Qty | Rate | Value |
|---|---|---|---|---|
| July 31st | Sell | 400 | Rs. 170 per share | Rs. 68,000 |
- Based on the FIFO principle, the 400 shares sold will be taken from the 1,000 shares purchased on Jan 1st.
- The new average rate is calculated as:
| Date | Buy/Sell | Qty | Rate | Value |
|---|---|---|---|---|
| Jan 1st | Buy | 600 (1,000 - 400) | Rs. 100 per share | Rs. 60,000 |
| June 1st | Buy | 1,000 | Rs. 120 per share | Rs. 1,20,000 |
| Total | 1,600 | Avg: Rs. 112.5 (1,80,000/1,600) | Rs. 1,80,000 |
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