The stock market is known for volatility and players expect markets to be volatile. In fact, the concept of the stock market itself is largely driven by the idea of capitalizing on the short-term and long-term fluctuations in stock prices.
Lower circuit. Have you ever been trapped in one? Many investors know that it is a nightmare more painful than applying for an IPO and not getting an allotment. A single day of lower circuit can still be manageable, but continuous or back-to-back lower circuits, like in the case of Cupid Breweries & Distilleries Ltd, where the share has been stuck for days, can be extremely frustrating and worrying.
Stock markets are naturally volatile, and price movements are a part of everyday trading. However, there are times when the volatility becomes extreme and triggers sharp and sudden falls in certain stocks. To prevent such uncontrolled declines, SEBI uses a system known as the lower circuit. This mechanism helps protect investors and maintain stability in the market.
Let us understand the lower circuit in detail and learn how to navigate such situations safely.
What is a lower circuit?
A lower circuit is put in place to restrict a continuous spiral down of a stock’s price beyond a predefined percentage. The lower circuit defines the lowest tradable price for a stock in a particular trading session. The stock will be ‘frozen’ at the lower circuit till the time there are no fresh buyers who come to the rescue.
When a stock hits its lower circuit, there will only be sellers and no buyers, but because the stock is already trading at the lower circuit, no more sell orders are entertained. However, buy orders will be executed without any hindrance because the lower circuit is put in place to restrict further selling, not buying.
Example: On December 11, 2025, the shares of Indo Thai Securities Ltd hit its 5% lower circuit and remained frozen throughout the day. This prevented any additional fall and protected the stock from severe panic-driven selling.
Why do stocks hit the lower circuit?
A stock may hit its lower circuit due to several reasons. Some of the most common triggers include:
- Negative news about the company such as management exits or regulatory issues.
- Index-wide or sector-wide selling that drags related stocks down
- Large investors, AMC withdrawals or block deals by FIIs and DIIs.
- Panic selling or operator-driven activity when sentiment suddenly turns negative.
- When selling pressure becomes intense and buyers disappear, the stock quickly falls until it touches the lower circuit.
Who Sets Circuit Limits and How Does SEBI Regulate Them?
The lower circuit limit is set by the stock exchanges, NSE or BSE, according to rules set by SEBI and current market conditions. It is calculated as a percentage of the previous day’s closing price and varies depending on the stock’s volatility, liquidity, and category.
Circuit bands usually range from 2% to 20%. These limits are reviewed periodically and can be revised depending on market conditions.
Investors can check daily circuit limits on the NSE/BSE website.
How to Sell Lower Circuit Stocks?
Selling a stock that has hit the lower circuit can be challenging because there are no buyers available at that price. However, there are a few practical steps you can take to improve your chances of exiting the position.
First, try to place a sell order during the pre-open session. This time window is ideal because orders are matched based on demand and supply before regular trading begins. By placing your sell order at 9 AM in the pre-market session, you increase the likelihood of finding a buyer if the stock opens with some buying interest.
It is also important to understand that lower circuits are a part of market volatility. Prices move up and down frequently, and SEBI has introduced circuit breakers to control sudden or random price swings. Even with research and planning, you may still get caught in a lower circuit. In such cases, acting quickly is crucial.
Always keep your sell order ready and avoid staying stuck in a stock that has been hitting lower circuits for multiple days. The longer you remain trapped, the higher the risk of losses. Following these steps helps you exit at the earliest possible opportunity.
Tips to Avoid Lower Circuit Traps
Many traders, especially beginners, get stuck in lower circuit stocks because they ignore a few basic precautions. Keeping the following points in mind can help you stay safe during volatile market phases.
Check liquidity before entering a trade: Always see how actively the stock is traded. Look at daily volumes and the depth of buy and sell orders. If a stock has very low liquidity, it becomes difficult to exit when prices start falling. This increases the risk of getting trapped in a lower circuit.
Use stop losses without fail: Stop losses act as a safety net. They automatically close your position once the price hits a specific level. This prevents small losses from turning into large ones. Many traders avoid placing stop losses and end up stuck when the stock suddenly hits a lower circuit.
Avoid taking heavy, concentrated positions: Putting too much money into a single trade can be risky. Instead, spread your investments across different stocks or sectors. Diversification reduces overall risk and protects your portfolio if one stock unexpectedly locks in a lower circuit.
Keep enough balance for intraday positions: Sometimes, intraday trades do not square off and get converted into delivery due to volatility or technical issues. If you do not have enough funds in your account, this can create unnecessary stress and force you into a difficult position. Maintaining a buffer ensures smooth handling of such situations.
By following these simple habits, traders can protect themselves from sudden price shocks and manage their trades with more confidence and discipline.
Conclusion
Lower circuits are designed to protect investors from extreme price falls and maintain stability in the stock market. While seeing a stock hit its lower circuit can be unsettling, it does not always signal fundamental weakness. Understanding how circuits work, how buying and selling behave during a freeze, and how to exit on time can help you navigate such situations with confidence.
With the right strategies and discipline, traders can avoid circuit-related traps and make more informed market decisions.
FAQs
How long does a stock stay in the lower circuit?
Typically, for a trading session, until fresh buyers appear, but some illiquid stocks may remain frozen for multiple days.
Can we buy shares when the stock hits the lower circuit?
Yes, buying is allowed; selling is halted. Limit orders increase the chances of execution.
Why do stocks hit the lower circuit?
Due to negative news, panic selling, large investor exits, or index-wide falls.
What is the difference between the lower and upper circuits?
The lower circuit restricts falling prices, upper circuit restricts rising prices in a trading session.
When was the last time the Nifty hit the lower circuit?
The Nifty 50 index last hit the lower circuit on 13 March 2020, during the global market crash triggered by the COVID-19 pandemic. On that day, Nifty fell by over 10 percent early in the session, which triggered the index circuit filter and led to a trading halt under the market-wide circuit breaker rules.
When was the last time the Sensex hit the lower circuit?
The Sensex also hit its lower circuit on 13 March 2020, when it fell sharply during pandemic-related sell-offs and triggered a 10 percent market-wide circuit breaker halt. BSE halted trading for about 45 minutes once the Sensex breach was confirmed.
How can we sell a stock if there are no buyers?
You cannot sell your shares until a buyer shows interest. This may happen within minutes for active stocks, but for illiquid stocks, it can take days or even weeks.
What is the Nifty lower circuit?
The Nifty lower circuit is the maximum allowed single-day downside limit for the Nifty index. It prevents excessive market crashes and safeguards investors during high volatility.
What happens when a stock hits the lower circuit?
When a stock touches its lower circuit, trading in that stock is frozen at that price. No further decline is allowed, which helps reduce panic selling and brings temporary stability.
