Why do stocks hit the lower circuit and how do sell/buy stocks which have hit the lower circuit?
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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 short-term and long-term fluctuations in stock prices. However, what if this volatility goes beyond the controllable range and results in erratic movements in stocks – and unprecedented profit/loss? SEBI has put in place mechanisms to keep price volatility in check, and that is by setting price circuits on stocks. Circuits curb the movement of stock price beyond a maximum permissible limit and safeguard investors from any sudden out-of-the-box price movements which might catch them wrong-footed. In a scenario where a stock is reacting wildly to a negative news development and has entered into panic selling where investors are dumping their investments, a lower circuit will come to the rescue. The lower circuit will limit any further fall in the stock on that given day beyond a certain percentage. If