Why do stocks hit the lower circuit and how do sell/buy stocks, which have hit the lower circuit?
Market participants anticipate volatility because the stock market is notorious for it. In fact, making money off short- and long-term price changes in stocks is a key principle behind the very idea of the stock market. However, what if this volatility exceeds the range that can be controlled, causing abnormal stock movements and unheard-of gains or losses? By putting price circuits on equities, SEBI has implemented methods to control price volatility. Circuits prevent investors from being caught off guard by any abrupt, unexpected price changes by limiting the movement of stock price beyond a certain permitted level. 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 until the time there are no fresh buyers who come to the rescue. When a