Knowing the upper and lower circuit for stocks

The shares have hit the upper circuit band.. the stock was locked in lower circuit level..
That’s common whenever you read a piece of stock news. And we know what you think after reading them, what do these terms even mean and what’s their importance?

Upper circuit

The upper circuit is the maximum price band or range in which a stock can move upwards on a daily basis. Once that stock hits its upper circuit level, its trading is suspended for the rest of that day’s trading hours i.e., the stock cannot be traded beyond that range on that particular day.
It also means that there are only buyers in the stocks and no sellers.

Lower circuit

Just the opposite. Stock is locked in a lower circuit if it exceeds the minimum price band/range to which the stock is allowed to fall downwards for the day. Stocks locked on lower circuit mean there are only sellers in the stocks — as said, just opposite to the upper circuit band.

Circuit Levels

The stocks’ price bands start from 5%, 10% and 20% (maximum range). The level differs for each stock.
However, the stock exchanges also revise the price band for the stock over time as they review it periodically due to surveillance actions, based on different criteria like its market capitalization, price-earnings ratio, price variation, volatility, volume variation, etc. Circuit filter for indices is decided by the market regulator SEBI.

Meanwhile, future and options (F&O) stocks are an exception as no price band is applicable to securities on which derivative products are available as stated by the exchanges

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