In a bid to navigate the tumultuous seas of financial markets, circuit breakers emerge as silent guardians, ensuring stability in the face of rapid fluctuations. These safeguards, triggered by significant index movements, have become a pivotal force in preventing panic-driven trading.
Pause, Reflect, and Reassess: How Circuit Breakers Tackle Market Panic
When indices swing by 10%, 15%, or 20%, the market takes a breather. A strategic timeout unfolds: a 45-minute pause before 1 pm, a 15-minute interlude between 1 and 2:30 pm, and if it persists after 2:30 pm, the show goes on. However, if the rollercoaster continues to 15%, a lengthier timeout of 105 minutes before 1 pm, 45 minutes between 1 and 2 pm, or closure after 2 pm ensues. The final safety net? A 20% surge or slump means curtains for the day.
Beyond Indices: Individual Stocks Dance to Circuit Limits
It's not just about indices; individual stocks also twirl within circuit limits. Routine dancers hit upper or lower bounds, especially in non-F&O stocks where limits range from 2% to 20%. The dance floor differs for F&O stocks — no fixed limits, just strategic pauses as they graze certain bands.
Market Choreography: When Buyers and Sellers Find Harmony
Every stock transaction is a dance. Circuit limits often hit when the music falters — too many buyers, too few sellers, and the stock hits the upper circuit. Conversely, an excess of sellers and scarce buyers lead to the lower circuit. While big stocks rarely experience these dance-offs, smaller companies' shares find themselves on the circuit floor more often.
Balancing Act: Circuit Breakers Bring Order to Market Chaos
In the intricate ballet of the stock market, circuit breakers emerge as the choreographers, orchestrating pauses and ensuring a graceful dance between buyers and sellers. As financial markets continue their rhythmic journey, these guardians play a vital role in averting chaos and maintaining equilibrium. Stay tuned as the market waltz unfolds, led by the ever-watchful eyes of circuit breakers.