What are upper and lower circuits (circuit limits)?
Circuit limits are exchange-set caps on how far a stock or index can move in a day. Hit the limit and trading pauses or freezes at that price.
A circuit limit (or circuit breaker) is a maximum percentage a stock or index is allowed to move up or down in a single trading session. When a stock hits its "upper circuit" it can’t trade higher that day; at its "lower circuit" it can’t trade lower. Exchanges use these to curb panic and manipulation and give everyone a moment to breathe.
For individual stocks the band (commonly 2%, 5%, 10%, or 20%) depends on the stock and whether it’s in the derivatives segment. When a stock is "locked" at the upper circuit, there are only buyers and no sellers (everyone wants in); locked at the lower circuit, only sellers and no buyers. That can make it hard to exit a falling small-cap.
There are also market-wide index circuit breakers: if the Nifty or Sensex moves 10%, 15%, or 20%, the whole market halts for a set time. As an investor, the practical lesson is liquidity risk — a stock repeatedly hitting lower circuits can trap you, which is one more reason to be cautious with thinly-traded, hype-driven small-caps.
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Common questions
What does "stock hit upper circuit" mean?
It rose by the maximum percentage allowed for the day, so trading is frozen at that price with buyers but no sellers. It often reflects strong positive news or speculative buying.
Can I sell a stock stuck in lower circuit?
Often not easily — if it’s locked at the lower circuit there are sellers but no buyers, so your order may not execute until the lock breaks. This is a real liquidity risk in small, volatile stocks.