Markets Glossary
Circuit Limit
The maximum percentage a stock or index is allowed to move in a session before trading is restricted — India's exchange-level price control mechanism.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
A circuit limit (price band) caps how far a security's price can move in a single day. Individual stocks are assigned bands — commonly 2%, 5%, 10% or 20% — and once the price hits the band, orders can only be placed within it, effectively freezing further movement in that direction. Stocks with derivatives contracts have no fixed daily band but operate with dynamic price ranges that can be flexed intraday.
Separately, market-wide circuit breakers halt all equity trading if the benchmark index moves 10%, 15% or 20%, with the halt duration depending on the size and timing of the move.
India Context
Exchanges set and revise stock-level bands based on surveillance criteria — a stock that repeatedly hits its circuit can have its band tightened (say from 20% to 5%), which is itself a surveillance signal worth noting. Long sequences of upper or lower circuits with thin volume are a familiar pattern in Indian small-caps: they can indicate genuine one-sided news, but also low-float stocks being walked up or a rush for exits with no buyers.
Example
A small-cap hits its 5% upper circuit for eight straight sessions on negligible delivery volume, then announces a large but vague order win. The exchange seeks clarification, moves the stock to a tighter band, and the sequence reverses into lower circuits. The circuit history and exchange clarifications — all public — tell the story better than the price chart.
Frequently Asked Questions
Why do some stocks have no circuit limit?
Stocks in the derivatives (F&O) segment don't have fixed daily bands, because price discovery also happens in futures. They instead have dynamic operating ranges that exchanges can flex intraday.
What happens when the index hits a circuit breaker?
Market-wide trading halts — the duration depends on whether the move is 10%, 15% or 20% and the time of day. A 20% move halts trading for the rest of the session.
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