Consider this scenario
I bought 100 shares of Infy on Jan 1 2018, pledged them.
bought another 100 6 months down the line.
After a year Jan 2019 if I sell 100 shares which shares am I selling. The first 100 or the second lot.
Basically even after pledging does FIFO rule apply?
It I pledge only some of my stocks in a scrip which are blocked, FIFO?
Hey Vibhu, let’s take the below example for easier understanding. Let’s say you made the following transactions in INFY:
01/01/2018 INFY Buy 100 QTY @ Rs. 515
01/06/2018 INFY Buy 100 QTY @ Rs. 615
05/06/2018 Pledged 100 QTY for margin
01/01/2019 INFY Sell 100 QTY @ Rs. 700
On 05/06/2018, 100 shares which you bought first on 01/01/2018 will move out of your demat account to Zerodha pledge account. The movement of shares for a pledge happens based on FIFO itself. So the remaining shares in your demat will be the 100 shares which you bought on 01/06/2018. Now any sale transaction will effect in shares being debited out of what is available in your demat account. Therefore, on 01/01/2019 the 100 shares available in your account which was bought on 01/06/2018 will be debited and you will be having 100 shares under pledge at Rs. 515 each.
I had a question. After the migration to the new pledge mechanism, as the pledged shares now remain within one’s Demat account itself, can it be said that the above example (mainly the part about shares bought at Rs.615 being debited) is no longer valid (leaving aside accounting / P&L computation which will always happen based on FIFO basis as you clarified in another thread)?
Yes, you are right. So in the above example, there’ll be a small change. After all transactions, the 100 shares available in your account under pledge will be at an average price of 615 each.