As per Accounting Standard 2 (AS 2) — Valuation of Inventories, inventories should be valued at: 

AS 2 (Valuation of Inventories) mandates that inventories be measured at the lower of cost and net realisable value. This reflects the principle of prudence: anticipated losses are recognised immediately while anticipated gains are not recorded until realised. Net Realisable Value (NRV) is the estimated selling price in the ordinary course of business, less the estimated costs of completion and costs necessary to make the sale. Cost of inventories includes costs of purchase, conversion costs, and other costs incurred in bringing inventories to their present location and condition. Permitted cost formulas under AS 2 include FIFO and Weighted Average Cost; LIFO is explicitly not permitted.