Faced with an issue. Kindly enlighten me on this please. Bullets to keep it simple.
INFIBEAM:
31Oct - buy 50 shares
09Nov - buy 49950 more
12Nov - buy 34000 more (T1 status)
Total shares 84000. Average 56.22/-
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14Nov - sell 6940 shares for 57/-
14Nov - (same day) sell 77060 shares for 56.95/-
sold all shares (84,000) at 56.954 average
14Nov - (same day) buy 80,000 shares back in the following fashion
25000 - 56.25/-
25000 - 56.00/-
25000 - 55.55/-
5000 - 53.50/-
Total shares 80,000. Average (as per my understanding) 55.79/- (lower from last ave 56.22)
17Nov - Average shown on Kite is 56.60 (way higher than the highest buy price 56.25)
17Nov - I call support and the guy assures me that it will be corrected by Monday
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19Nov - Average same. I raise a ticket to support with trade book reference copy.
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21st Nov - I get reply that value shown is correct (56.60) with an .et attachment
that cannot be opened even after installing (some) Kingsoft software! Reason stated is
that it was considered intraday trade. Its was a very vague answer with an odd file
attachment. Whatever happened to the excel which most humans use (!?)
#1 Anyway, question is, if I had sold 84,000 (in which 34,000 T1) shares for 56.954/- as
average and bought back 80,000 shares on the same day for 55.79/- is there any
possibility for the AVERAGE to GO HIGHER than the buy average because the stocks
were not delivered into my demat account?
#2 If so, please enlighten my ignorance in this regard as to how average would change
for an ‘commodity’ I bought for a ‘specific’ price. Intraday or not, what does it have
to do with the ‘price’ at which I bought a ‘commodity’. Am I losing cash or am I
missing something critical? Or does it deserve an escalation to the next level.
Asking for your kind guidance before taking next step.
The buy average is calculated on First In First Out (FIFO) basis excluding intraday transactions. In your case explained above, 80000 shares were traded intraday on 14th Nov, these transactions will not affect the buy average of your existing holding. An additional 4000 shares were sold which moves out of your demat and affects your buy average. Now your buy average might go lower or higher based on the acquisition cost of the shares that is remaining in your account.
Let’s consider the below example for easier understanding:
Day 1 - buy 4000 shares at 50 - buy average for 4000 shares is 50
Day 10 - buy 80000 shares at 56.5 - buy average for 84000 shares will now be 56.190
Day 20 - sell 4000 shares at 57 - as per FIFO, the 4000 shares bought on Day 1 will move out. All 80000 shares bought on Day 10 at a price of 56.5 will remain in your demat. Hence, the buy average of your holding (80000 shares) will now increase to 56.5 from the previous average of 56.190
Hope this answers your query. We will have someone from our support desk to check your ticket and send you the calculations.
Thank you very much Mr. Nakul for the intel offered. It does throw some light.
Now if time permits you, please give this a couple of minutes of your time.
On Jan 15th - someone buys 10 shares of XYZ company for 5 Rs (Now Ave is 5)
On Jan 17th - 20 more shares are bought of XYZ for 10 rs (Now Ave is 8.33)
On Jan 20th - 40 more shares are bought of XYZ for 20 Rs. (Now Ave is 14.99)
On Jan 22nd he sells all 70 shares (Where 40 shares are not yet delivered, i.e T1).
#1. Does each individual share cost 14.99 on sale or first 10 shares are valued 5Rs each on sale, as first in first out (first price stays or what)? #2. If the person buys back the XYZ share, 40 nos again (T1 quantity), on the same day, will these 40 shares for lets say 18 Rs (lower price) per share, run for average against the ALREADY SOLD T1 intra-day shares bought for 20 Rs before? #3. As per Kite, (a) will the Average go up to 19? OR (b) will the Average be 18 itself as it was the price for which it was bought. I do CNC only, no intentional intra-day. #4. What if the buy back was from a different exchange? Do the averages cross exchanges?
I’m not sure if the hypothesis what I’ve put in is clear enough, but I hope your intelligence cuts through it. Thanks in advance for your kindness and precious time. Regards to everyone else too.
#1 The FIFO rule prevails. The cost of the shares moving out will be the actual price at which you bought it. If you consider 14.99, this will be simple average and not FIFO.
#2 & #3 CNC (Cash and Carry) and MIS (Margin Intraday Squareoff) are only product types offered by us and there is no differentiation as such in the exchange system. Using the MIS product type, you can avail leverage and take bigger positions than the capital available in your account on intraday basis. However, if you execute an intraday trade (buying and selling on the same day) using the CNC product type it’ll not affect your holding average as this will still be an intraday transaction, irrespective of your T1 holding. Consider the below example:
Day 1 - buy 40 shares at 20
Day 3 - Trade 1 - sell 40 shares at 22
Day 3 - Trade 2 - buy 40 shares at 18
Day 3 - Net Position at the end of the day: Net Qty = 0; Profit = 4 per share
Day 4 - Holding: 40 shares - buy average of 20 (will be under regular holding and not T1)
On Day 3, the 40 shares bought previously at 20 will be under T1. Trade 1 of day 3 doesn’t imply that the available 40 shares under T1 will move out. What affects your holding average will be your net position at the end of the day. Since you’ve closed your position on day 3, there will be no change in the buy average of your holding i.e., 40 shares at 20. On day 4, you’ll see 40 shares under your holdings at an average of 20 (bought on day 1, which would have been delivered in your demat by the end of day 3).
#4. In this case your buy average will change. Taking the same example from above:
Day 1 - buy 40 shares at 20 - NSE
Day 3 - Trade 1 - sell 40 shares at 22 - NSE
Day 3 - Trade 2 - buy 40 shares at 18 - BSE
Day 4 - Holding: 40 shares (bought on BSE) - buy average of 18 (will be under T1)
I’m eternally grateful to you. I was perceiving the whole thing from a totally different perspective. I was caught up in the simple average and thought when I was doing CNC and not MIS mine would not be considered intra-day no matter, what since I pay cash. Actually someone told me that. I get it now. Busy schedule kept me off from tracking deeper. Kind people like you are a blessing out here. Thank you very much for your time and patience.
PS: Btw, could you tell me how much leverage does a buyer get in MIS. For ex: If I’m intending to buy 1L worth shares, whats the minimum balance I need to have in my account. I understand the loss will be taken away from my account when it is squared- off at the end of the day or when the loss exceeds my balance.