If you are investing in the stock market, then you would be aware of the upper circuit. It is the maximum limit that a particular stock can reach. Although this value is decided by the SEBI, there are some specific upper circuit rules one should be aware of.
Knowing these rules can help you in knowing the time when to trade, how to trade and how to earn maximum profit from your trade.
Here, let us look at some upper circuit rules for stocks that you should follow.
Rules for Upper Circuit in NSE
In India, deciding the upper circuit limit is in the hands of the Securities and Exchange Board of India (SEBI). Each stock has one so that the investors are not dragged into the eternal loop of panic-trading.
Some of the top upper circuit rules are enlisted below.
Upper Circuit Breaker
There are usually three stages in BSE and NSE, where the circuit breakers are applied. The steps signify that the trading stops at three places, i.e., 10%, 15%, and 20%.
All the stocks can have a price band of 20%, 15% or 5% depending upon the previous day closing price.
Other than this, there are times when the market-wide circuit breakers are applied. This happens when either the Nifty 50 or the BSE SENSEX breaches the limits.
Upper Circuit Trading
These are market-wide intervals at which the circuit breakers are applied. As a trader, you should know that there are no sellers when a stock reaches the upper circuit.
In all, the upper circuit point is where you can buy a particular stock to earn maximum profit on your trade.
Upper Circuit Time
The upper circuit is not for a long time, and the trading has to be done very quickly. As soon as the stock exits the upper circuit, the hustle of selling and buying begins again.
There are fixed timings and upper circuit rules. Let’s understand this better.
10 % rise or fall
15 % rise or fall
20% rise or fall
Before 1 pm- halt for 45 minutes
Before 1 pm- halt for 1 hour 45 minutes
Any time of the day- trading halts for the rest of the day
1 pm- 2:30 pm- halt for 15 minutes
1 pm-2:30 pm- halt for 45 minutes
After 2:30 pm - No halt
After 2:30 pm- for the rest of the day
BSE Upper Circuit Limit Rules
Similar to NSE there are specific upper circuit rules in BSE as well. The SEBI offers few rules according to which stock trading is halted when the price of a share rises 10%, 15% or 20% of its current price.
As per the guidelines, the BSE determines the circuit level to protect investors to face any kind of unwanted movement of stock price.
BSE has to announce the change in circuit filter percentage by displaying daily circular or notice.
In case of suspicious activity in the stock, the exchange can apply filter percentage as per their wish.
At the point if the stock reaches the upper circuit then no selling is allowed, however, buying is at peak.
At upper circuit, no intraday trading is allowed.
Apart from usual circuits, BSE only stocks generally have weekly, monthly, quarterly or yearly circuit rates thus there are restrictions in the stock price moment within the week, month or the year respectively.
The upper circuit can be used for trading but keeping certain things in mind. As a trader, you have to be extra cautious and quick in making decisions because the upper circuit does not stay forever.
The upper circuit is essential because otherwise, the prices will increase indefinitely. There are specific times and percentages at which the stock experiences circuit breakers.
These are the rules and limits that are set by the securities and education board of India.
You can follow the rules and get to know about the upper circuit properly.
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