Average share price after buying more, and what averaging down really changes
The short answer. Your average price is the total money paid divided by the total shares held. Forty shares at ₹1,500 and sixty at ₹1,200 cost ₹1,32,000 for 100 shares, an average of ₹1,320. Adding the two prices and halving them gives ₹1,350, which is wrong, because the larger purchase counts for more.
Anyone who has bought the same share twice has an average price. It is the figure that decides whether the holding is up or down today, and the one people want to move when they "average down" after a fall. Both questions are plain arithmetic, and the Stock Average Calculator does both.
The formula
Average price = (q₁ × p₁ + q₂ × p₂ + …) ÷ (q₁ + q₂ + …)
Each q is a quantity bought and each p the price paid for it. Every purchase counts in proportion to the money behind it. The order of the purchases makes no difference.
A worked example
| Purchase | Quantity | Price (₹) | Amount (₹) |
|---|---|---|---|
| First buy | 40 | 1,500 | 60,000 |
| Second buy, after a fall | 60 | 1,200 | 72,000 |
| Holding | 100 | 1,320 average | 1,32,000 |
The simple mean of the two prices is ₹1,350. It is ₹30 too high here because the cheaper purchase was the larger one. When the purchase sizes differ, the gap can be large: ten shares at ₹100 and ninety at ₹200 average ₹190, not ₹150.
If the price today is ₹1,150, the holding is worth ₹1,15,000: ₹17,000 below the ₹1,32,000 put in, a loss of 12.88%. The price has to get back to ₹1,320, the average, to break even.
The average after buying more
Buying 50 more at ₹1,150 makes 150 shares that cost ₹1,32,000 + ₹57,500 = ₹1,89,500, so the new average is ₹1,89,500 ÷ 150 = ₹1,263.33.
To reach a chosen average instead, work the formula backwards. If you hold Q shares at an average A and buy at price P, the number of shares q that brings the average to a target T is:
q = Q × (T − A) ÷ (P − T)
To bring the ₹1,320 average down to ₹1,250 by buying at ₹1,150: q = 100 × (1,250 − 1,320) ÷ (1,150 − 1,250) = 100 × (−70) ÷ (−100) = 70 shares, costing ₹80,500. The holding becomes 170 shares at an average of ₹1,250. The Averaging Down Calculator page opens with this target question already switched on.
What averaging down does not change
After those 70 shares, the holding of 170 is worth 170 × ₹1,150 = ₹1,95,500 against ₹2,12,500 put in. The loss is still ₹17,000. What has changed:
- the break-even price has fallen from ₹1,320 to ₹1,250;
- the loss is now 8.00% of the money in, not 12.88%, only because more money is in;
- ₹2,12,500 rides on one share instead of ₹1,32,000.
Averaging down lowers the price the share has to return to. It does not recover money already lost, and it raises the stake in the same share. That is arithmetic, not advice for or against it.
Buying at or above the target cannot reach it. Shares bought at ₹1,250 pull the average towards ₹1,250 but never to it, and the formula's answer is meaningless there. The buying price has to be below the target average.
What the average leaves out
- Charges. Brokerage, STT, stamp duty, exchange charges and GST raise what each purchase cost, so the real cost per share is a little above the average here. The Brokerage Calculator adds them.
- Tax. Capital gains on listed shares in India are worked out first in, first out: the oldest shares count as sold first, at what they cost. The average tells you what the holding cost, not what a partial sale is taxed on.
- Bonus issues and splits. These add shares without adding money, so the average falls in proportion: 100 shares at ₹190 become 200 at ₹95 after a 1:1 bonus. Enter the extra shares as a purchase at a price of zero.
Questions people ask
How do I calculate the average price of shares bought at different prices?
Multiply each purchase's quantity by its price, add those amounts, and divide by the total number of shares. Forty shares at ₹1,500 and sixty at ₹1,200 cost ₹1,32,000 for 100 shares, so the average is ₹1,320. Adding the two prices and halving them gives ₹1,350, which overweights the smaller purchase.
How many shares should I buy to average down?
Multiply the shares you hold by the gap between your current average and the target, then divide by the gap between the target and the price you would pay. Holding 100 at ₹1,320 and aiming for ₹1,250 while buying at ₹1,150 needs 70 more shares, costing ₹80,500. The buying price must be below the target.
Does averaging down reduce my loss?
No. It lowers the price at which the holding breaks even, but the money already lost stays lost. A holding ₹17,000 down is still ₹17,000 down after buying more at today's price, while more money now rides on the same share. In the worked example, the break-even price falls from ₹1,320 to ₹1,250 and the loss stays the same.
Does brokerage change my average price?
Yes, slightly. Brokerage, STT, stamp duty, exchange charges and GST all add to what a purchase cost, so the true cost per share sits a little above the average worked from prices alone. The Stock Average Calculator leaves them out because they differ by broker and segment; the Brokerage Calculator adds them with each charge sourced.
Is my average price used for capital gains tax?
No. Capital gains on listed shares in India are worked out first in, first out: the oldest shares are treated as sold first, at the price actually paid for them. The average answers what the whole holding cost you. A partial sale is taxed on the cost of the earliest shares, which can be higher or lower.
Sources
Checked 15 Oct 2026:
- Every average, cost and gain on this page is calculated with the Stock Average Calculator's own formulas: the weighted average, the position at today's price, and the target formula q = Q(T − A) ÷ (P − T). There is no rate, slab or government figure in them.
- The first in, first out rule for listed shares and the list of charges left out are as stated in the calculator; see the Brokerage Calculator for each charge and its source.