Have you ever heard of a trading halt for a certain period of moment? If you answered yes, you may have been confused as to why it happened. So, there you have it! It ‘s all because the share ‘s rate hits the upper circuit level. In this post, we’ll go through a basic understanding of Upper Circuit Meaning & how the upper circuit functions.
Table of Contents
How upper circuit is decided?
There are measures in place from the Securities and Exchange Board in India to avoid significant price fluctuations in a short period of duration. When the rate swings above or below the limit, trading on the stock is suspended.
The price band refers to the Circuit limit in which the stock can be exchanged without being paused. Orders put outside of the price range will be denied.
The trading will be automatically suspended if the price falls or goes above to the upper/lower price range. To avoid inaccurate order positioning F&O stocks have flexible price ranges.
Time Period
|
Circuit limit in Indices |
Timing |
Restriction Time frame |
|
10 % |
Before 1300 hrs |
60 Mins |
|
1300 hrs to 1430 hrs |
30 Mins |
|
|
After 1430 hrs |
No Restriction |
|
|
15 % |
Before 1300 hrs |
120 Mins |
|
1300 hrs to 1430 hrs |
60 Mins |
|
|
After 1430 hrs |
Closed for rest of the hours |
|
|
20 % |
Any time |
Closed for rest of the hours |
Upper Circuit Means
When a stock hit the maximum level of the Circuit limit of that stock, this is know as upper circuit in stock market. When a share price enters the upper circuit, trading is halted for a set period of duration.
However, Upper circuit limit for every stock is different starting from 2% to 30%. Whereas, The normal circuit limit is around 20% for most of the stocks.
However, Since the upper circuit is only present for a short period, trading must be done quickly. Finding sellers after a share price reaches the upper circuit can be difficult.
After Upper Circuit Meaning, Let’s Discuss how it works?
What is Upper Circuit?
Price range and circuit filters are 2 terms that are widely used in the share market. On the one side, the price range is utilized for specific shares while the circuit filter is reserved for whole indexes. As a result, indexes have circuit filters where specific shares have price ranges.
The meaning of upper circuit now represents the highest price level above which the rate does not rise. These circuit filters are placed at 5%, 10%, 15%, and 20%, respectively. When the circuit levels are triggered on either sides, trading in all sections, including F&O, is halted.
If you want to trade on the upper circuit, you must reserve your spot ahead of time. The upper circuit keeps stocks from skyrocketing and stops traders from panicking.
Example of upper circuit meaning
A stock has a circuit limit of 20 percent and the price of the stock is rs. 100. So if the stock upper limit of the stock will be rs. 120.
The upper circuit means that on that trading day, the rate of this specific share will not rise above Rs. 120. The trade will be stopped if it reaches the upper circuit according to the time given in the above chart.
Importance of Upper circuit limit
- When the share exceeds the limitation, a circuit limit is enabled. To reduce losses, the upper circuit becomes necessary.
- The upper circuit is responsible for preventing an unjustified rise in stock price on a given trading day. Consider what would happen if there was no limit: the value of a share would skyrocket, making trading extremely challenging for traders.
- The upper limit is normally set based on the following day’s closing price of the share. The circuit normally begins at 20% and then varies based on the requirement of the trading day.
Conclusion
The upper circuit has become a critical component of the share market, and a thorough knowledge of it is now necessary.
This is all from our side regarding Upper Circuit Meaning & how it works. Let us know your views in the comment section.
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FAQ About Upper Circuit Stocks Meaning
upper circuit means in hindi?
एक शेयर एक दिन में कितना उपर जा सकता है उससे उसकी ऊपरी सर्किट सीमा कहते है
how is upper circuit decided?
The Upper circuit is decided based on previous close price and recent few days trading in the stock.
Who decides upper circuit and lower circuit?
The exchange decide it on the instructions given by Sebi.
What happens when a stock hits upper circuit?
The trading in that particular stock will be stop according to the timetable given by Sebi to the exchanges.
Upper circuit time limit?
The time limit will be depend on the circuit filter. Time table is mentioned in this blog.
