Circuit limits of stocks

Hi everyone,
Can you explain how does circuit limits of exchange(s) work because some stocks like sanwaria have been locked in upper circuit everyday. Circuit limit for it was revised from 10% to 5%.

So whenever it hits 5% increase in price, it gets locked in circuit.

But recently banking stocks went high upto 40% in a single day. Examples - PNB, SBI & more which rallied in 20 % to 30% .

1- Please explain why these banking stocks were not locked in circuits despite HUGE gain.
2- If stock(s) are locked in circuit, are they temporarily blocked for intraday or they get locked for entire day?

Many stocks which hit upper/lower circuit get locked for entire day but I read somewhere that the circuit lock is only temporary & trading resumes after 1- 2 hours.

3- How can we be then held responsible if our stock gets locked in circuit & we are unable to square off our intraday position ?
Exchange will impose penalty on trader & auction market proceedings will follow.

Waiting for your answer.
Thanks

The stocks which go above 20% are those traded in the derivatives segment. Explained in the link below:

This depends on the buyers and sellers. Stocks usually remain at circuit levels after reaching it but there are also rare instances where a stock can start to trade again on the same day.

Your position is your responsibiliy. You have to ensure you place an SLM stoploss for your position so if the trade goes against you, your stoploss is triggered and your position is squared off at market price before the circuit is hit.
Yes, if you have a sell position that wasn’t squared off before market close, then the exchange will buy these shares back from the auction market and hand it over to the person who bought it from you. Auction penalty will apply.

@Spaceship, the bottom line is you should not short a stock that is hitting upper circuit continuously as you can’t square off by buying it back as there will not be any sellers. In case you short and take the risk, then you should have a SL to get out before the Upper Circuit is reached.

Mr. Srinivas & Mr. Lakshmikanth,
Thanks for your response but if I m long on a position which later hits an upper circuit, I wont be able to exit. What will happen ?

If I am short on a falling stock which later hits lower circuit, then ?

Considering both the above cases where my position is in profit but I m unable to square off due to circuit.

How will I get my profit then ?

If you are long and if it hits upper circuit, you can sell. And vice-versa.

On both cases you can exit at profit. In 1st case, there will be buyer’s at the UC so you can sell and in the 2nd case there will be sellers at the LC so you can buy.

It is the reverse to the above that you cannot do, that is buy at UC and sell at LC though in both the cases your order will be in the queue but there is no guarantee of a fill.

Hope I have clarified your queries.

You have mentioned that I can sell at upper circuit & buy at lower circuit to exit my long & short position(s) respectively.
But since you are telling that the reverse of it cant be done i,e I cant buy at upper circuit & sell at lower circuit.

If I cant buy at upper circuit then how can other’s buy( from me ) at upper circuit because I can sell at upper circuit according to you.

Vice versa applies for sell too.

Please explain.
Thanks

At upper circuit, people don’t usually sell in the anticipation that the stock will go up further tomorrow. Similarly, a lot of buyer queue up to buy at the upper circuit price in the same hope that they can sell it at a higher price tomorrow. So if someone happens to sell at upper circuit, it will go to the person whose first in the buy queue in order of time priority. If you are the first person in the buy queue and some one sells, then you will get the shares. But if you are behind in the queue and there are no sellers, then you wont be able to buy.

But if circuit limit blocks the trading in that stock for temporary period & later again this blocking is applied for the rest of the day.
If the stock is blocked from trading due to circuit then are you sure that the trading can still take place?

The stock is not blocked from trading due to circuit. It only stops trading because there are no buyers and sellers to match.

@Srinivas
@Spaceship
@Lakshmikanth_Jadhav
@rj07

AND WHAT IF INCASE OF,

1- Stocks (F&O or Non- F&O) which was Short sold in BRACKET ORDER that hits(SL) Upper Circuit, whether this will go to Short Delivery holding for T+2 auction or Sq.off will happen once the SL Trigger hits Upper Circuit or Auto Sq.off done at 3:20 pm by Zerodha?

2- What will happen if Long buy position in BRACKET ORDER which hits lower circuit in F&O Stocks & Non F&O Stocks?

3- Whether SL Trigger limit order(absolute value) can be placed above Or Below Upper and Lower circuit levels in BO Short or Long Positions respectively in Day Trading purpose in both F&O and Non-F&O Stocks?

Yes, it will go to short delivery, because you cannot buy back manually or auto-square-off as there are no sellers at UC and since you do not have the shares to honor the short sell, it will go to auction.

As you do not have buyers at LC, you cannot cover (sell) and the long stocks logically should get converted to delivery, if cash is available matter closed, else ZERODHA should get in touch with you for the balance cash. This is my assumption, someone from ZERODHA should ratify it.

Should be possible, you could look at the daily range for the stock and do so. This is a good technique to cover your risk of short delivery or call for additional funds.

I would only say for example, u short sell a stock XYZ @ 100 rs.

Assume, that the stock is not a part of F&O & so it has circuit limits as set by exchange.

Let the day’s circuit limit of this stock be set at 10% by exchange.

So if this stock rises or falls by 10%, then the circuit will get applied.

Now let us assume this stock opened @ 100 & previous close was 95.

So it opened 5.26 % in green from previous close.

And you shorted @ 100 . While placing Bracket Order, SL = within 3% range .

So SL = 103. And upper circuit limit of stock is at 104.5

So u are in safe limits & your position will get squared off well before stock hits UC.

What if u had SHORTED @ 103 ?

Interesting to note that you wouldn’t be able to place a SL @ max 3% range because you will get error that SL cannot be more than circuit limit of the stock!!

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