{"id":52673,"date":"2026-07-30T18:28:47","date_gmt":"2026-07-30T12:58:47","guid":{"rendered":"https:\/\/flattrade.in\/kosh\/?p=52673"},"modified":"2026-07-30T18:28:47","modified_gmt":"2026-07-30T12:58:47","slug":"what-is-upper-circuit-and-lower-circuit-in-stock-market","status":"publish","type":"post","link":"https:\/\/flattrade.in\/kosh\/what-is-upper-circuit-and-lower-circuit-in-stock-market\/","title":{"rendered":"What is Upper Circuit and Lower Circuit in stock market?"},"content":{"rendered":"\t\t
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Circuit limits\u2014officially referred to as price bands or circuit filters\u2014are regulatory mechanisms established by stock exchanges to curb excessive market volatility. They act as automated risk-management safeguards designed to protect market integrity, prevent systemic panic, and mitigate price manipulation.<\/p>\n

By establishing predefined price boundaries within a single trading day, exchanges ensure orderly price discovery and maintain liquidity standards across listed equities.<\/p>\n\n<\/div>\n\n

1. Defining Circuit Limits<\/h2>\n

A circuit limit represents the maximum permissible price fluctuation for a security within a given trading session, calculated relative to its previous day’s closing price.<\/p>\n\n

\n\n\n
\nCeiling Limit\n<\/span>\n

Upper Circuit (Price Ceiling)<\/h3>\n

Definition:<\/strong> The highest price level a stock is permitted to trade at during a specific session.<\/p>\n

Market Dynamics:<\/strong> Driven by extreme buy-side interest or sudden material events (e.g., earnings beats, strategic acquisitions, or favorable regulatory decisions).<\/p>\n

Order Book Imbalance:<\/strong> Buy orders accumulate at the ceiling price while sell orders dissipate. Matching ceases until sell-side liquidity is reintroduced at or below the upper limit.<\/p>\n\n<\/div>\n\n

\nFloor Limit\n<\/span>\n

Lower Circuit (Price Floor)<\/h3>\n

Definition:<\/strong> The lowest price level a stock can reach within a single session.<\/p>\n

Market Dynamics:<\/strong> Driven by severe sell-side pressure or adverse corporate developments (e.g., accounting irregularities, credit rating downgrades, or broader macroeconomic shocks).<\/p>\n

Liquidity Freeze:<\/strong> Sell orders accumulate at the floor price while buy bids drop to zero. Investors experience temporary illiquidity until buyers return.<\/p>\n\n<\/div>\n<\/div>\n\n

2. Market-Wide Circuit Breakers vs. Single-Stock Filters<\/h2>\n

While single-stock filters restrict individual securities, exchanges also deploy Market-Wide Circuit Breakers to manage broad market panics. These halt entire equity and derivative segments when major market indices (such as the Nifty 50, or Sensex) cross specific threshold triggers.<\/p>\n\n

\n\n\n\n\n\n\n\n\n\n
Index Movement<\/th>\nTrigger Window<\/th>\nTrading Halt Duration<\/th>\n<\/tr>\n<\/thead>\n
10% Threshold<\/strong><\/td>\nBefore 1:00 PM<\/td>\n45 minutes<\/td>\n<\/tr>\n
10% Threshold<\/strong><\/td>\n1:00 PM \u2013 2:30 PM<\/td>\n15 minutes<\/td>\n<\/tr>\n
15% Threshold<\/strong><\/td>\nBefore 1:00 PM<\/td>\n1 hour 45 minutes<\/td>\n<\/tr>\n
15% Threshold<\/strong><\/td>\nAfter 2:00 PM<\/td>\nHalt for remainder of the session<\/td>\n<\/tr>\n
20% Threshold<\/strong><\/td>\nAny time during market hours<\/td>\nComplete session suspension<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n\n

3. Why Do Stock Exchanges Use Circuit Limits?<\/h2>\n

Circuit limits are designed to maintain a fair and orderly market. Their primary objectives include:<\/p>\n\n