What is a Circuit Limit?
A circuit limit (also called price band or circuit breaker) is the maximum percentage a stock's price can move — up or down — in a single trading session. Once a stock hits its upper or lower circuit, trading is either halted or restricted to prevent panic buying or selling.
Circuit limits are set by SEBI and enforced by NSE and BSE. They exist to protect retail investors from extreme price manipulation and to give the market time to absorb new information rationally.
Price Bands for Individual Stocks
SEBI assigns individual stocks to different circuit filter categories based on trading activity, liquidity, and governance quality:
- No circuit (for derivatives-eligible stocks): Nifty 50 and most F&O stocks have no daily circuit limit — but still have market-wide circuit breakers (see below)
- 20% circuit: Most liquid non-F&O stocks on NSE/BSE
- 10% circuit: Mid-cap stocks with moderate liquidity
- 5% circuit: Less liquid stocks
- 2% circuit: Highly illiquid penny stocks or stocks under surveillance (ASM/GSM list)
Upper Circuit vs Lower Circuit
- Upper Circuit: Stock has gained the maximum allowed percentage. There are only buyers at or above this price — sellers have disappeared. Trading continues but only buy orders are accepted. Example: Stock opens at ₹100 with 20% circuit. Upper circuit = ₹120. If it reaches ₹120, only buyers can place orders.
- Lower Circuit: Stock has fallen the maximum allowed percentage. There are only sellers — buyers have disappeared. Example: Lower circuit = ₹80. Only sell orders accepted.
A stock hitting consecutive upper circuits (several days in a row) is called a "multibagger momentum" scenario. Hitting consecutive lower circuits signals a crisis — promoter selling, fraud, or severe business deterioration.
Market-Wide Circuit Breakers (Index Halt)
SEBI also has index-level circuit breakers that halt ALL trading across NSE and BSE if Sensex or Nifty 50 moves by large percentages:
- 10% move: 45-minute trading halt (if before 1 PM); 15 minutes (if between 1–2:30 PM); no halt if after 2:30 PM
- 15% move: 1 hour 45 minutes halt (if before 1 PM); 45 minutes (if between 1–2 PM); rest of day if after 2 PM
- 20% move: Trading halted for the rest of the day regardless of time
Market-wide circuit breakers have triggered only a few times in Indian history — during the 2008 financial crisis and briefly in March 2020 COVID crash.
ASM and GSM — Enhanced Surveillance
Stocks showing unusual price or volume activity get placed under ASM (Additional Surveillance Measure) or GSM (Graded Surveillance Measure). This reduces the circuit to 5% or 2% and may require enhanced margins (50–100% upfront margin). Check the NSE/BSE website for the current ASM/GSM list before trading small-cap stocks.