Investors and traders often see the terms “Upper Circuit” and “Lower Circuit” in the markets. In order to ensure that one does not get stumped by such jargon used by market veterans, let us take a look at what the upper circuit means and read up about a few stocks that have hit the upper circuit.
The upper circuit is the highest percentage and price limit that a stock is permitted to reach during a trading session before trading for that stock is halted. The upper circuit limit for different stocks is set at a different level, generally at 5%, 10%, 15% or 20%. When the stock price sees such movements, no buy trades are executed for a specified period of time or till the price comes down.
Similarly, there is a lower circuit limit which works in a similar manner when stock prices plunge.
The securities market regulator, the Securities and Exchange Board of India (SEBI), has set these limits to control excessive volatility in the markets and to protect the interests of investors. It allows traders an opportunity to reconsider their strategies and prevent impulsive and speculative trades.
This means that market players cannot execute any more buy orders when the upper circuit is hit for a particular stock. It also indicates high buying interest in the market which may lead to profits for bullish investors or traders. However, as trading is halted, one must wait till trading is resumed before adding the stock to one’s holdings.
The stock may hit its upper circuit when there are only buyers in the market. A sudden spike in demand for the stock due to some positive news in the market usually leads to a stock hitting the upper circuit.
Political unrest in the country or in the country with which the company conducts major business, alterations to trade agreements, changes in the interest rates set by the central bank, financial performance of the company, announcement of corporate actions, mergers, acquisitions, expansions, order wins and many other factors may lead to a stock hitting the upper circuit.
Indices of the stock exchanges also have circuit limits just like individual stocks, even though they are rarely triggered. The indices have an upper circuit limit of 10%, 15% and 20%.
If the index hits the 10% upper limit post 2:30 PM, trading will continue as such volatility is typically seen towards the end of the trading day. If the 10% limit is hit between 1 PM to 2:30 PM, trading is stopped for 15 minutes, whereas if it is hit before 1 PM, trading is halted for 45 minutes.
If the index moves by 15%, trading will be halted for the remainder of the trading day if it occurs after 2:30 PM. If the movement happens between 1 PM and 2:30 PM, trading will be suspended for 45 minutes. If it occurs before 1 PM, trading will be suspended for 1 hour and 45 minutes.
If the index experiences a 20% rise at any time during the trading day, trading will be suspended for the remainder of the day.
Some of the stocks in the upper circuit list today are listed below:
| Scrip | Upper Circuit Limit | LTP |
| 63 MOONS | 5% | 663.05 |
| Hind Rectifiers | 5% | 60.45 |
| Asian Hotels | 5% | 5.92 |
Q. What is an upper circuit?
The upper circuit is the highest price limit that a stock is permitted to reach during a trading session before trading for that stock is halted.
Q. How long does trading halt when a stock hits the upper circuit?
Trading is halted till the end of the day unless sellers enter the market and take the price lower.
Q. Can you sell a stock on the upper circuit?
Yes, you can place a sell order when stock is on the upper circuit. However, it would be prudent to make such a decision after careful consideration.
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