Circuit Limit
A circuit limit (or circuit breaker) is the maximum percentage by which a stock's price can rise (upper circuit) or fall (lower circuit) during a single trading day before trading in that stock is automatically halted by the exchange.
Understanding Circuit Limit
Circuit limits exist to prevent panic selling, manipulation, and excessive volatility from cascading. When a stock hits its upper circuit, no buy orders can be matched at higher prices for the rest of the day; when it hits the lower circuit, no sell orders match at lower prices. Stuck orders accumulate but don't execute.
Market-wide circuit breakers also exist on Nifty 50 and Sensex — at 10%, 15%, and 20% movements (up or down), trading is halted exchange-wide for 45 minutes, 1 hour 45 minutes, or the rest of the day, respectively.
Why it matters
Circuit limits matter most for traders in small-cap, mid-cap, and SME stocks where they trigger frequently. Hitting the upper circuit means you can't add to a winning position; hitting the lower circuit means you can't exit a losing one. Always check the circuit limit before placing orders, especially for after-hours or pre-open volatility plays.
Example
A small-cap stock with a 5% circuit limit closed yesterday at ₹100. Today's upper circuit is ₹105 and lower circuit is ₹95. After positive earnings news, the stock opens at ₹102 and within 30 minutes hits ₹105 — triggering the upper circuit. Trading freezes; no trades match above ₹105 for the rest of the day. Buyers stuck in the queue must wait until tomorrow when the new circuit limit (₹105 + 5% = ₹110.25 maximum) opens up.
A small-cap stock with a 5% circuit limit closed yesterday at ₹100. Today's upper circuit is ₹105 and lower circuit is ₹95. After positive earnings news, the stock opens at ₹102 and within 30 minutes hits ₹105 — triggering the upper circuit. Trading freezes; no trades match above ₹105 for the rest of the day. Buyers stuck in the queue must wait until tomorrow when the new circuit limit (₹105 + 5% = ₹110.25 maximum) opens up.