How is the buy average calculated in Console?
If you trade in the same scrip multiple times, you will notice the present average price of your holdings or positions changes. The buy average price is calculated on a FIFO basis (first-in-first-out).
The shares you purchase first are considered to be sold first from your account. You are required to consistently follow FIFO to report the P&L in your income tax returns.
The buy average calculation of your holdings will exclude intra-day trades. If you sell your holdings and then buy it back the same day, the difference will be considered an intraday profit or loss and your holdings buy average will remain unaffected.
To understand how FIFO works, let's assume you have made the below trades:
So the buy average of ITC that would display in your holdings is = Rs 261 i.e (30*260) + (30*256) + (20*270) / (50+30-20+20).
To know how the buy average will be calculated when you trade intra-day in the stocks you hold, refer to this article.
In some scenarios where the buy average calculation shown on Console can be incorrect. But this error will not impact your actual margins or P&L. Learn more in this article.