What is the meaning of circuit breaker?
In simple words, circuit breaker is the limit imposed on stocks or on Index to trade within the range.
If this range is violated then that stock or index (In case of Index, trading will be halted on both indices) will come under circuit breaker system.
If the stock or index moves in upward direction and violates the upper limit then that stock or index will come under upper circuit breaker
The price band is applied on individual stocks to trade within that range and if the price range is violated in either direction then the trading in halted on that stock.
The price band on individual stocks changes on daily basis as follows.
Percentage is applied based on the previous day's closing price.
A stock can have price bands of 20% either way
A stock can have price bands at 10% either way
A stock can have price bands at 5% either way
A stock can have price bands at 2% either way
No price bands are applicable on stocks on which derivative (futures and options) products are available.
For more details you can visit NSE web page
What are the Rules for circuit breakers for stocks and indices
The Exchange has implemented index-based market-wide circuit breakers with effect from July 02, 2001 based on SEBI Circular No. SMDRPD/Policy/Cir-37/2001 dated June 28, 2001. SEBI vide its Circular no. CIR/MRD/DP/ 25 /2013 dated September 03, 2013 has partially modified the earlier circular. The revised guidelines are as below.
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 Nifty 50, whichever is breached earlier.
The market shall re-open, after index based market-wide circuit filter breach, with a pre-open call auction session. The extent of duration of the market halt and pre-open session is as given below:
Trigger limit Trigger time Market halt duration Pre-open call auction
session post market halt
10% Before 1:00 pm. 45 Minutes 15 Minutes
At or after 1:00 pm
upto 2.30 pm 15 Minutes 15 Minutes
At or after 2.30 pm No halt Not applicable
15% Before 1 pm 1 hour 45 minutes 15 Minutes
At or after 1:00 pm
before 2:00 pm 45 Minutes 15 Minutes
On or after 2:00 pm Remainder of the day Not applicable
20% Any time during
market hours Remainder of the day Not applicable
Exchange shall compute the Index circuit breaker limits for 10%, 15% and 20% levels on a daily basis based on the previous day's closing level of the index rounded off to the nearest tick size.