Upper circuit and lower circuit
The daily price limits beyond which a stock cannot trade.
Market structure
What is Upper circuit and lower circuit?
Indian exchanges cap how far most stocks can move in one day. Each stock is assigned a price band (typically 2%, 5%, 10% or 20%) based on its volatility and surveillance status. When a stock hits the top of its band it is 'in upper circuit': it can still trade at that price but not above, and usually only buyers remain. Stocks in the F&O segment have no fixed band but dynamic limits that the exchange can widen. Separately, index-level market-wide circuit breakers halt all trading when the Nifty or Sensex moves 10%, 15% or 20%.
Formula
Upper circuit price = previous close × (1 + band %)
Lower circuit price = previous close × (1 − band %)
How to read it
- Repeated upper circuits on low volume often mean there are almost no sellers, which also makes exiting hard.
- Exchanges move stocks to tighter bands (and trade-for-trade settlement) when surveillance flags unusual activity.
- A liquid stock hitting its circuit on heavy volume is usually reacting to major news.
Common mistakes
- Chasing circuit stocks. Liquidity can vanish in both directions, and a lower circuit can trap holders for days.
