Download Unicorn Signals App

Powered By EquityPandit
knowledge

What is upper and lower circuit?

Stock prices can either move up or down and hence circuit breakers are required for movements in both directions. An upward movement over the threshold will cause a stock to enter an upper circuit and you may not find any seller at that time. Similarly a downward movement in stock price beyond the threshold will cause a stock to enter a lower circuit and you would not find any buyer at that time.

The objective of circuit breakers is to control the stock markets at times when they move beyond reasonable limits. When a stock enters an upper circuit, it puts an investor who has already invested in the stock at an advantage. On the contrary a stock movement into a lower circuit places the investor at a disadvantage because it is now difficult to sell off these shares as they have lost a lot of money.

Movement in Indices

Time

Close period

10 per cent

Before 1.00 pm

45 Minutes

1.00 pm to 2.30 pm

15 Minutes

After 2.30 pm

Does not close

15  per cent

Before 1.00 pm

1 hour 45 Minutes

1.00 pm to 2 pm

45 Minutes

On or After 2.00 pm

Close for the rest of the day

20 per cent

Any time

Close for the rest of the day

The Securities and Exchange Board (SEBI) has defined various circuit levels namely 2%, 5%,10%, and 20%. These values are applied to the price of the stock at which it closed on the previous day.
For e.g If XYZ stock has closed at Rs 100 yesterday and if it has a 10% circuit limit, then today it will have circuit limits of Rs 90 and Rs 110 as lower and upper respectively. That means if the stock reaches Rs 90 or Rs 110, then the trading for the stock will be halted.

Get Daily Prediction & Stocks Tips On Your Mobile