How is the circuit limit for Stocks decided for the Indian stock market ?

Answer 1

Well researched answer:

Circuit Breakers

The Exchange has implemented index-based market-wide circuit breakers in compulsory rolling settlement with effect from July 02, 2001. In addition to the circuit breakers, price bands are also applicable on individual securities.
Index-based Market-wide Circuit Breakers

The index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%. These circuit breakers when triggered, bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier.

* In case of a 10% movement of either of these indices, there would be a one-hour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for œ hour. In case movement takes place at or after 2:30 p.m. there will be no trading halt at the 10% level and market shall continue trading.


* In case of a 15% movement of either index, there shall be a two-hour halt if the movement takes place before 1 p.m. If the 15% trigger is reached on or after 1:00p.m. but before 2:00 p.m., there shall be a one-hour halt. If the 15% trigger is reached on or after 2:00 p.m. the trading shall halt for remainder of the day.


* In case of a 20% movement of the index, trading shall be halted for the remainder of the day.

These percentages are translated into absolute points of index variations on a quarterly basis. At the end of each quarter, these absolute points of index variations are revised for the applicability for the next quarter. The absolute points are calculated based on closing level of index on the last day of the trading in a quarter and rounded off to the nearest 10 points in case of S&P CNX Nifty.

Answer 2

The Circuit Limits in the Stocks is decided to regulate the manipulative or one way price drugging of the Particular stock, Regarding the Limits, Exchange monitors the fluctuations and then reduces or increases the circuit filters of the stock.
If particular stock increases/decreases 10% on two consecutive days then the Exchange may reduce the circuit filter to 5 %, again if consecutively increase/decrease continues exchange may again reduce it to even 2%.
The Circuit Filters are decided on the Fluctuation in prices and volume of the Shares traded.
For the Group A Shares many out of which r also in the derivative segment the Circuit filter limit is free which has even given extension of 40% a day either side, We saw it few days back in the case of IFCI Ltd.

Answer 3

I think the circuit limit for a stock is decided by the stock exchanges according to the performance of the particukar stock. A group companies have higher circuit limit (35% max.) and Z group copmanies have less circuit limit ( 5%) ([e-mail])