Circuits in share market

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Many retail investors buy stocks which have some corporate governance issues just because they are trading at cheaper prices after the heavy selling. But they don’t understand that catching a falling knife is the biggest mistake which they are doing. In such cases, those stocks closes Circuit-to-circuit on consecutive days destroying huge capital of investors. If they are lucky they get a chance to exit the stock after a few days to avoid further losses. I have seen many traders who don’t know what are the circuit levels for some particular security they are trading and end-up placing a Stop loss at such a deep level that they actually incur more losses in SL itself. Therefore, to avoid such things, one should know what the concept of circuit breakers in the Secondary Market. Let’s see what are the index-based market-wide circuit breakers and what are scrip-wise circuit breakers?

Index-based Circuit breaker system

  • An Index based market-wide circuit breaker system applies at three stages of the index movement either way at 10%, 15% and 20%.
  • These circuit breakers bring about a coordinated trading halt in trading on all equity and equity derivatives markets across the country.
  • The breakers are triggered by movements in either Nifty 50 or Sensex, whichever is breached earlier.

10% Circuit rules

  • In the case of 10% movement in either of these indices, there would be a one-hour market halt if the movement takes place before 1:00 p.m.
  • In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for ½ hour.
  • In case movement takes place at or after 2:30 p.m. there will be no trading halt at the 10% level and market would continue trading.

15% Circuit Rules

  • In case of a 15% movement of either index, there should be a two-hour halt if the movement takes place before 1 p.m.
  • If the 15% trigger is reached on or after 1:00 p.m. but before 2:00 p.m., there should be a one-hour halt.
  • If the 15% trigger is reached on or after 2:00 p.m. the trading should halt for the remainder of the day.

20% Circuit Rules

In case of 20% movement of the index, trading should be halted for the remainder of the day.

Scrip-wise Price Band

  • Daily Price Bands of 2% (either way) on set of specified securities.
  • Daily price bands of 5% (either way) on a set of specified securities.
  • Daily price bands of 10% (either way) on a set of specified securities).
  • Price bands of 20% (either way) on all the remaining securities (including debentures, warrants, preference shares etc. which are traded on CM segment of NSE)
  • No price bands are applicable on scrip on which derivative products are available or scrips included in indices on which derivative products are available.
  • However, in order to prevent members from entering an order at non-genuine prices in such securities, the Exchange has fixed an operating range of 20% for such securities.
  • The Price bands for the securities in the Limited Physical Market are the same as those applicable for the securities in the Normal Market. For Auction Market the price bands of 20% are applicable

The exchange views entries of non-genuine orders with utmost seriousness as this has market-wide repercussion. It may suo-moto cancel the orders in the absence of any immediate confirmation from the members that these orders are genuine or for any other reason as it may deem fit.


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