What is Upper Circuit and Lower Circuit in Stock Market is an important question that every investor should understand. When the price of a stock in the stock market suddenly starts going up or down very fast, a circuit limit is imposed by the exchange to protect investors and maintain stability in the market. Through Stock Charcha, we will explain to you in simple language how it works.
What is Upper Circuit?
When the price of a stock rises very rapidly and reaches a certain threshold, it is called the Upper Circuit. This means that above that threshold, the share price cannot rise further on that day. This range is usually up to 5%, 10%, or 20%. For example, if a share is priced at ₹100 and has an upper circuit of 10%, then its maximum price on that day can only be ₹110.
What is Lower Circuit?
Conversely, when the price of a share falls sharply and reaches a certain threshold, it is called the Lower Circuit. That is, below that limit, the share price cannot fall further on that day. For example, if there is a lower circuit of 10% on a share of ₹100, the minimum price cannot go below ₹90 on that day.
Why are Upper and Lower Circuits important?
Stock Charcha believes that the Upper and Lower Circuits are very important for investors’ safety. They prevent sudden fluctuations and maintain market stability. At the same time, they give investors time to make the right decisions without panic.
Tips for Investors
New investors should always look at what the upper and lower circuit limits are on the stock they are investing in. This will make it easier for them to understand how much risk there is in that stock.
This way, you now have a clear understanding of what is upper circuit and lower circuit in the stock market and why it is important for every investor to know. Stock Discussion will keep explaining the depth of the stock market to you with such easy and reliable knowledge.
FAQs- What is Upper Circuit and Lower Circuit in Stock Market
What is upper circuit and lower circuit in stock market?
This means that there is a limit to how much the stock price can go up or down in a day.
Why is it important for investors to understand what is upper circuit and lower circuit in the stock market?
This is important because it lets the investor know how much risk a stock has in the event of a sudden huge fluctuation.
How does SEBI decide what is upper circuit and lower circuit in stock market limits in India?
SEBI fixes circuit limits on individual stocks up to 5%, 10%, or 20%, depending on their volatility and market cap.
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Written by Hasanraza Ansari
Founder of Stock Charcha · Simplifying investing for India
Finance & Operations Specialist, helping beginners invest smarter through Stock Charcha.
Educational content only. Investing in the stock market involves risks. Please do your own research or consult a SEBI-registered financial advisor before investing.
