SEBI has introduced a rule known as Circuit Breaker in the stock market for both Index and Stock specific circuit limits. The circuit filter limit is introduced with the intention to reduce the speculations in the market and stock-specific trading.
There are two ways to apply a circuit filter: Upper circuit filter and Lower circuit filter. Depending upon the increase or decrease in stock price the respective circuit filter will be applied. So when buying stocks in the current stock markets you must first learn about the stock market and know the stock market prices and then consider online trading stocks.
When a stock is on the upper circuit limit there will be only buyers in the market and no seller exists and hence the price is up.
On the other hand, a lower circuit limit is when there are only sellers in the market for that stock and hence the stock price is down.
There are two ways to apply a circuit filter: Upper circuit filter and Lower circuit filter. Depending upon the increase or decrease in stock price the respective circuit filter will be applied. So when buying stocks in the current stock markets you must first learn about the stock market and know the stock market prices and then consider online trading stocks.Index-specific Circuit Filter:
This filter applies to either Sensex or Nifty whichever is breached earlier. Now there are three filters for Index-based circuit at 10%, 15% and 20%.- If either Sensex or Nifty falls 10% before 1:00 pm, trading halts for one hour in the market. If the index drops after 1.00 pm but before 2:30 pm, trading halts for a half-hour. If the index drops after 2:30 pm, there will be no halt for trading at a 10% level and the market would continue trading for the remaining time.
- If either Sensex or Nifty falls 15% before 1:00 pm, trading halts for two hours in the market. If the index drops after 1:00 pm but before 2:00 pm, trading halts for one hour. If the index drops on or after 2:00 pm, there will be no trading for the remaining time.
- In case of a 20% drop in either of the index, the trading halts for the remaining day.
Stock specific Circuit Filter:
Stock specific circuit filters are applied in both BSE and NSE index. The percentage for circuit filter limit is 2%, 5%, 10% and 20%.When a stock is on the upper circuit limit there will be only buyers in the market and no seller exists and hence the price is up.
On the other hand, a lower circuit limit is when there are only sellers in the market for that stock and hence the stock price is down.
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