What Is Upper Circuit And Lower Circuit In Stock Market?

hello friends, In this blog post(What Is Upper Circuit And Lower Circuit In Stock Market) we are going to discuss the lower circuit and upper circuit in the share market. If I explain to you in one single line then the lower circuit and the upper circuit is a price band that contains one lower price and one upper price value which is known as lower circuit and upper circuit. And the share market can fluctuate between these two values in one single day.

If you are not much aware of the share market then you probably would not have understood the meaning of the above paragraph clearly, but don’t worry I explain to you this lower circuit and upper circuit with a very simple example|What Is Upper Circuit And Lower Circuit In Stock Market|

I make you understand this concept with the help of one example, suppose the share price of Tata steel is 100 and it’ slower circuit is 80 rupee and the upper circuit is 120 then this means that this share price can fluctuate between 80 to 120 in one single trading day|What Is Upper Circuit And Lower Circuit In Stock Market|

The circuit can be applied to both stocks as well as indexes like Sensex and Nifty. And the stock or index circuit can be updated each day before starting the market depending on the circuit circumstances|

Once the lower or upper circuit is touched or crossed then the market is stopped for some time and then it opens for 15 min pre-open session and then it starts on a regular basis until the next circuit touches or ends the day which one comes first.

The circuit band may be in the percentage band of 5%, 10%, 15%, 20% and etc. And this percentage band will also depend on the volatility of the stock in the market.

What is the use of these lower circuits and upper circuits in the stock market?

These lower and upper circuit is usually used to protect the investor and brokers from the huge unwanted loss in case of one-sided extreme fluctuation of the share price.

If we will not put the lower circuit then the stock price can land at 0 and this could be dangerous for various investors and brokers and same case while sharing price increases without the upper circuit.

Who decides this percentage band of the upper circuit and lower circuit in the stock market?

This is decided by the stock exchange NSE and BSE.

Who manages and monitors the upper circuit and lower circuit in the share market?

This is monitor and managed by the SEBI. And once the lower circuit or upper circuit touches then SEBI stops the share market or stock marketing trading for some time completely and it is open for 15 min pre-open sessions and then it continues on the regular basis.

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Conclusion:

So, friends within this blog post(What Is Upper Circuit And Lower Circuit In Stock Market), we have understood the concept of the lower circuit and upper circuit in this blog post and we have known that is the safe price band for any stock or index which is decided by the stock exchange in which the market can fluctuate safely. And this circuit protects the investors and brokers from any unwanted huge market loss when there is any drastic up and down in the share market.

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Anurag

I am a blogger by passion, a software engineer by profession, a singer by consideration and rest of things that I do is for my destination.