What is Upper Circuit and Lower Circuit in Share Market? | How to Identify Upper and Lower Circuit?
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The market regulator SEBI sets up a price band basis the stock’s liquidity, market volatility, volume, and category of stock at which the stock can be traded on a given trading day. The upper band of the price band refers to the Upper Circuit whereas the lower end of the price band is a Lower circuit. On a given trading day, the highest the stock price can reach up to the upper circuit set by the regulator. Similarly, if the price of the stocks falls, the maximum it can go down is up to the lower circuit of the stock.
Also Read What is Bonus Share?
The price band for the stock is set up to ensure there is no extreme price movement. In addition, to protect the investors from unwanted surprises. They serve as market regulators on days of euphoric or panic selling.
At three stages of the index movement, it triggers the circuit breaker. If an index rises or falls by 10%, 15%, or 20%, the circuit breaker trips, resulting in a coordinated trading halt in all equity and equity derivative markets across the country.
However, the maximum permissible limit for stocks is calculated using the previous day’s closing price on exchanges.
Trading then resumes after a set period of time, based on whether the market was rising or falling at the time it was suspended. Following the halt, the markets will reopen with a 15-minute pre-open call auction session.
Duration of Halt
Trading halts for 45 minutes if an index falls or rises 10% before 1 p.m. If there is a 10% movement between 1 p.m. and 2:30 p.m., there is a 15-minute trading halt, and there is no halt if it occurs after 2:30 p.m.
On the other hand, trading halts for one hour and 45 minutes if there is a 15% movement before 1 p.m. In addition, it halts for 45 minutes if there is a rise or fall between 1 p.m. and 2:30 p.m. Trading halts for the remainder of the day if there is a 15% movement after 2:30 p.m.
Unlike the first and second stages, if a benchmark index moves by 20% at any time of day, trading halts for the day.
How to Identify Upper and Lower Circuit for Stocks in Zerodha?
Time needed: 1 minute.
In case, you like to check the Upper Circuit or Lower Circuit for a particular stock on Zerodha, you can simply follow these simple steps:
- Login on Zerodha Kite App
Enter your login credential on Kite App or website powered by Zerodha.
- Type the Stock Name
You can simply key the stock name in the Universal search bar tab. After that, click on the market depth Option.
- Find the Upper/Lower Circuit
You can find the Upper and lower circuit of the stock at the bottom of the stock details.
Breaching the upper limit and the lower limit of stocks and indices is a common phenomenon in the stock markets. The reaction to such a breach, however, can be extreme and often lead to huge investor losses. Circuit breakers ensure that the investors get time to react to market fluctuations more effectively and make sound investment decisions.