Upper circuit / lower circuit
A circuit limit is the largest move, up or down, that a share's price is allowed to make in one trading day. Hitting the top is called an upper circuit and hitting the bottom a lower circuit. Once the limit is reached, trading in that direction stops at that price.
How circuit limits work
The exchange sets a percentage band around the previous day's closing price. During the day the price cannot go above the upper limit or below the lower limit. If it touches a limit, buyers or sellers on the other side may find nobody willing to trade at that price, so orders can be left waiting.
The band is set by the exchange for each share, it can differ from one share to another, and it can be changed over time. That is why you should check the current band for a share rather than rely on a remembered number.
Why they exist
Circuit limits give the market a pause. They slow down a price that is moving very fast on rumour or panic, and they give investors time to take in news before the price moves further.
What it means for you
When a share is stuck at a lower circuit, there may be many sellers and few buyers, so you may not be able to sell when you want to. When it is stuck at an upper circuit, the reverse can apply. This is a form of liquidity risk, and it is one reason a share that moves sharply can be hard to exit.
Market-wide halts
Separate from limits on single shares, exchanges can also pause trading in the whole market if the main index falls or rises very sharply. The thresholds for these are set by the regulator and can change.
A lower circuit (hypothetical numbers)
Suppose a share closed yesterday at ₹100 and its band that day is 10 percent. The lower circuit is ₹90 and the upper circuit is ₹110. If bad news arrives and the price falls to ₹90, it cannot go lower that day. Anyone wanting to sell may have to wait, because buyers at ₹90 may be scarce.
Common questions
- What is an upper circuit?
- The highest price a share is allowed to reach on that trading day.
- What is a lower circuit?
- The lowest price a share is allowed to fall to on that trading day.
- Who sets the circuit limit?
- The exchange sets the band for each share, and it can change over time.
- Can I sell a share that is at its lower circuit?
- You can place the order, but it may not be matched if there are no buyers at that price.