Circuit limits on stocks
Exchanges set a daily price band for each stock, as a percentage of the previous close. Common bands are 2%, 5%, 10% and 20%, depending on the stock's category and surveillance measures.
Upper circuit and lower circuit
- Upper circuit: the price hits the top of its band. Usually only buy orders are waiting, so it is hard to buy.
- Lower circuit: the price hits the bottom of its band. Usually only sell orders are waiting, so it is hard to sell, which can trap holders in a falling stock.
Stocks in F&O
Stocks with futures and options do not have a fixed daily band. They trade within a dynamic price band that exchanges widen in steps when the price approaches it, so they can move more than 20% in a day on major news.
Market-wide circuit breakers
If Nifty 50 or Sensex moves by a set percentage in a day, trading halts across the equity and equity derivatives markets:
| Move in the index | Before 1:00 PM | 1:00 PM to 2:30 PM | After 2:30 PM |
|---|---|---|---|
| 10% | 45-minute halt | 15-minute halt | No halt |
| 15% | 1 hour 45 minute halt | 45-minute halt (before 2:00 PM); rest of day after 2:00 PM | Halt for the rest of the day |
| 20% | Halt for the rest of the day | Halt for the rest of the day | Halt for the rest of the day |
Trading resumes with a pre-open call auction. The trigger levels are set in index points each quarter from the previous quarter's closing level. India's market-wide circuit breaker was triggered twice in March 2020, during the Covid-19 sell-off.
Why circuit limits matter for traders
- Stops may not fill. A stock locked at its lower circuit cannot be sold, whatever your stop says.
- Gaps follow. A stock that closes at its upper circuit often opens higher the next day.
- Derivatives keep moving. If a stock with F&O is moving sharply, its derivatives can price in moves beyond the cash market's last trade.
Related terms
Learn more
Frequently asked questions
What is an upper circuit?
The highest price a stock can trade at that day, set by its price band.
Can I sell a stock in lower circuit?
You can place a sell order, but it fills only if a buyer appears at that price. Often there are none.
Do Nifty options have circuit limits?
Index options do not have the stock-style price bands, but exchanges set operating ranges for each contract, and a market-wide circuit breaker halts them along with the rest of the market.
How often do market-wide circuit breakers trigger?
Rarely. The last triggers were in March 2020.
Sources
- SEBI circulars on index-based market-wide circuit breakers
- NSE, price bands and dynamic price bands for securities