I have started Zerodha trading only early this year and transacted in Baja Finance only couple of months back, however, the average price of the shares is showing 430 and hence the P&L also is wrong. Now I am confused whether I am in profit or Loss.
On 31-08-2016 you had bought 1 qty @ 10850, On 08/09/2016 company had announced corporate action- Split & Bonus. Split FV Rs 10 to Rs 2 and Bonus 1:1 Now, after split qty 1 qty became 5 qty and price has dropped from Rs 10850 to Rs 2170/.
Again there was the Bonus of 1:1, now 5 shares has been added @ Rs 0/. On 11-11-2016 you added 5 qty @ Rs 860/- and on 16-11-2016 sold 5 qty @ Rs 880/-As per FIFO 5 qty sold on 16-11-2016 got adjusted with 5 qty received in split
Again there was the Bonus of 1:1, now 5 shares has been added @ Rs 0/- On 11-11-2016 you had added 5 qty @ Rs 860/- and on 16-11-2016 sold 5 qty @ Rs 880/-As per FIFO 5 qty sold on 16-11-2016 got adjusted with 5 qty received in split. Now, current holding is 5 qty received in Bonus @ Rs 0/- and 5 qty bought on 11-11-2016 @ Rs 860/- Avg. of 10 qty = (Rs 0/- + 860/-)/2 = Rs 430/-
When there is a split and bonus in a holdings scrip, the average price will change as and when shares are bought and sold in the demat.
Lets assume the following scenario:
1 share of BajajFinance was purchased on 31st Aug, 2016 at 10850
On 8th Sep, 2016 - Stock Split from FV 10 to FV 2 and Bonus issued at 1:1
After 1:5 split, 5 shares are available at 2170
After 1:1 bonus, 5 shares available at 2170 and 5 shares at 0, (Market price is now - 1085/share)
On 11th Nov, 2016 - another 5 shares bought at 860
On 16th Nov,2016 - 5 shares sold at 880
The System uses a First In First Out(FIFO) method for all shares that are bought and sold, which means that the shares that are bought first will be sold first. The input and output of shares will take place in the following fashion:
a. When 5 shares are bought at 860, the shares in demat are:
5 shares at 2170, 5 shares at 0 and 5 shares at 860 || Avg price = 1010/share
b. When 5 shares are sold at 880, the first 5 shares are sold and the shares in demat are:
5 shares at 0, 5 shares at 860 || Avg price = 430/share
c. When another 5 shares are sold at 890, the next 5 shares are sold and the shares in demat are:
5 shares at 860 || Avg price = 860/share
You can see the average price vary in each of the following cases, when stocks were either added or sold. One can observe that the average price will reflect closer to the current market price, only when all the bonus shares are sold from the demat.