A circuit breaker on NSE or BSE is an automatic halt in trading that triggers when a stock or index moves beyond a defined percentage limit in a single session. Its purpose is to prevent panic-driven price crashes by giving the market time to process new information.
The Three Circuit Limits
For individual stocks, SEBI mandates three circuit filter bands:
| Band | Price move triggers halt |
|---|---|
| 5% | Applied to most F&O stocks and large-caps with high liquidity |
| 10% | Applied to mid-cap stocks with moderate liquidity |
| 20% | Applied to small-cap and illiquid stocks |
When a stock hits its upper or lower circuit, trading halts for that stock. The halt duration depends on whether it is a stock-level circuit or an index-level circuit breaker.
Index-Level Circuit Breakers
For the broad market indices (Nifty 50, Sensex), SEBI applies market-wide circuit breakers at three levels:
- 10% move: 45-minute trading halt (15-minute halt if triggered in the last hour)
- 15% move: 1 hour 45-minute halt (halt for remainder of day if triggered after 2 PM)
- 20% move: Trading stops for the remainder of that trading day
These index-level breakers were last triggered during the COVID-19 crash in March 2020.
What Circuit Breakers Mean for Traders
Liquidity disappears. When a stock hits a circuit, you cannot buy or sell at any price until trading resumes. If you hold a position in a stock that hits a lower circuit, you are locked in — unable to exit even if you want to cut losses.
Midcap risk is higher. Stocks with 20% circuit filters can be halted all day if a piece of bad news hits. Thinly traded midcaps can stay locked in lower circuits for multiple consecutive sessions — effectively making your position illiquid for days.
Operators use circuits. A stock near an upper circuit creates artificial scarcity — buyers can see pending orders but cannot buy. This creates FOMO (fear of missing out) that operators exploit to push retail traders into chasing the stock as it re-opens.
Understanding how circuit breakers affect liquidity and price behaviour is covered as part of the market structure framework in Book 1 of the Drishti Series: The Honest Beginner.
For educational purposes only. Profitma is not a SEBI-registered investment adviser or research analyst. Nothing in this article constitutes investment advice.