What are circuit limits or price bands?
Circuit limits, or price bands, are safeguards set by the exchange to prevent large movements in the price of stocks in a very short time. When the price of an instrument hits the upper or lower circuit limit set by the exchange, orders will remain pending at that circuit price for that particular stock or contract( EQ, FNO, CDS or MCX).
The price band determines the price range within which the stock can be traded for that day. The circuit limits, which range from 2 to 20%, depend on the liquidity, volume, and category of the stocks. The upper and lower circuit for a particular instrument can be found in the market depth on Kite.
Orders placed out of the price band will be rejected, and if the price drops to the upper or lower price band, the orders will remain pending till the limits are relaxed. To know what happens when the MIS position and circuit limits are hit, see What will happen to my intraday (MIS/CO) position in case the stock circuit limits are hit?
Did you know?
Equities with Futures & Options (F&O) contracts don't have fixed circuit limits for the day. However, there is a dynamic price band of 10%. The exchange has a fixed operating range of 10% on either side to ensure trading is done within the specified range. When the price approaches these levels, the limits are relaxed further. There is currently a cooling period of 15 minutes before new limits are added for F&O stocks. To learn more, visit www1.nseindia.com/products/content/equities/equities/price_bands.htm.