If I already hold 5 shares of ‘Reliance’ in my Demat. Now If I do BTST (Buy Today Sell Tomorrow) with new 10 shares of Reliance, then will FIFO (First In First Out) be applied in this case or not (As the latest 10 shares have not reached my demat as the trade is BTST) ?
As per the settlement process, your BTST trades will get settle first and if any remaining will go from your Demat account, but when it comes to buying price avg calculation you need to follow the FIFO mechanism.
Hi Pawan, I think your 1st point is wrong and 2nd point is right, I actually tried this recently…"I already had 2 Ultratech shares at an avg. price of Rs.0 (from corporate action). Later I did BTST with 10 shares (bought at Rs.4642 and sold at Rs.4750). I found that my 2 shares which were already there in my demat, got sold along with 8 latest shares (My profit & loss ledger confirms this). Now my account is showing 2 Ultratech shares at an avg price of Rs.4642 (instead of 0).
So that means even if you do BTST, the shares follow the FIFO mechanism.
As I already said, when it comes to buying avg price calculation system will follow the FIFO mechanism and the same can be seen in your example.
But if you take your transaction statement (debit and credit report) of your Demat A/c your 2 shares will remain as it is and BTST transaction would have got inter-settled first.
But the thing is that is not what happened…
My Realized profit in my ledger is showing = Rs.10,364 (9500 + 864), which clearly means that old shares were sold first.
and this is how:-
My Old 2 shares having buy price of Rs.0 got sold at Rs.4750 (So, Profit of Rs.9500)
My New 8 shares having buy price of Rs.4642 got sold at Rs.4750 [So Profit = 8(4750-4642)] = Rs.864
And now I am having new 2 shares in my demat at price of Rs.4642
And this can pose a problem in case of Tax Loss Harvesting.
You are absolutely correct, buying price calculation and computation of P&L happen in the same way FIFO.
What am trying to explain is if you take out your Demat A/c(not trading a/c) Transaction statement you will find BTST transaction settle first and later debit happens from your holding as I already mentioned earlier.
Note: A trading a/c is used for the buying and selling of the securities by means of it getting debited from your Demat a/c and sold in the market.
The Demat a/c on the other hand, allows investors to keep their securities where shares bought are deposited in, and where shares sold are taken from.