Circuit Breaker (Stock Market)
InvestmentsCircuit breakers are automatic trading halts triggered when market indices fall by specific percentages in a trading session. They prevent panic-driven crashes by giving markets time to stabilise. SEBI has three-level circuit breakers for Nifty and Sensex.
In detail
NSE/BSE index circuit breakers:n10% decline: 45-minute halt (if before 2:30 PM), 15 minutes (between 2:30-3 PM), trading closure (after 3 PM)n15% decline: 1 hour 45 minute halt (if before 2 PM), 45 minutes (2-2:30 PM), closuren20% decline: trading closed for the remainder of the daynnIndividual stock circuit breakers:nUpper/lower circuit: when individual stocks hit 5%, 10%, or 20% limits, trading halts in that specific stock for varying periodsnnCircuit breaker history in India:nMarch 13, 2020 (COVID crash): Nifty fell 10%, triggering 45-minute circuit break.nMarch 23, 2020: Circuit breaker triggered again as markets fell 13% intraday.nnFor investors: circuit breakers during crashes are buying opportunities, not signs to sell.
Real-life example
March 23, 2020: Nifty opened at 7,900 (from 12,000 pre-COVID). Within first hour, fell 13%. Circuit breaker triggered -- 1 hour 45 minute halt. Investors who used the halt to assess and buy quality index funds or stocks at those levels earned 100-120% returns by December 2021. Circuit breakers create forced calm in panic -- use them to think, not to sell.