In the share market, a lower circuit is the maximum limit by which a stock’s price can fall in a single trading day. Once this limit is hit, trading in that stock is halted or restricted to prevent further price decline and panic selling.
Why Do Lower Circuits Happen?
Triggered by bad news, poor earnings, market crash, or sudden fear
Used as a safety mechanism to protect retail investors from extreme volatility
Helps cool down the market during a crash-like situation
Who Sets the Lower Circuit Limit?
The stock exchanges (NSE & BSE) set these limits based on SEBI’s rules. They are typically:
2%, 5%, 10%, or 20% of the previous day’s closing price
The percentage depends on the stock’s volatility and liquidity
What Happens When a Stock Hits Lower Circuit?
No sell orders get executed unless someone is willing to buy at that price
Stock is marked as “seller freeze” on most trading platforms
Trading gets halted until the price moves back within the allowed range or until the next session
Example:
If Stock XYZ closed at ₹100 yesterday and has a 10% lower circuit, it can fall only to ₹90 today. Once it hits ₹90, it cannot go lower for the rest of the trading day.
Final Thoughts:
The lower circuit in share market is a protective barrier designed to stop panic-driven freefall in stock prices. For retail investors, it’s important to recognize such events and not react emotionally. Instead, focus on fundamentals and long-term goals.
