Can We Sell Shares In Upper Circuit: Have you ever bought a stock and dreamt of it hitting a 100% gain in one day? If that sounds too good to be true, it probably is.
SEBI has set a cap on how high or low a stock can fall within one day, preventing investors from losing their entire investment literally overnight. They introduced the concept of circuit breakers that limit how high or low a stock can go within a day.
In this blog, we’re going to talk about these circuits and answer some questions like “Can we sell shares in the upper circuit?” So read ahead to find out. Before that, you need to understand the meaning of circuit limits and their purpose.
What Is The Upper Circuit And Lower Circuit In The Stock Market?
In order to safeguard investors’ wealth, SEBI has set a circuit limit as to how high or low a stock can rise and fall within a day. You might have come across news titles that read – “ABC Stock hits upper circuit today because of quarterly results.”
On the other hand, you might have also come across articles that cover the sudden drop in prices due to some news involving the company. Either way, you will notice that the share price climbs or falls to a certain limit that is set by stock exchanges.
The upper circuit is the highest price that a stock can climb in one day. So if a stock hits the upper circuit, it means the stock has reached the highest it possibly can for the day. When this happens, the stock will only have buyers and no sellers.
The lower circuit is the exact opposite of the upper circuit – It is the lowest price that a stock can fall on a particular day. Here the stock will only have sellers and no buyers.
The purpose of setting circuit limits is to protect investors. Especially from the rapid movement that we see in other volatile markets such as cryptocurrencies that can either make or break portfolios.
Stock Z is trading at ₹200 and has a 10% circuit. This means that the stock cannot be allowed to fall or rise more than 10% in one trading session. This means that it can rise or fall to anywhere between ₹220 – ₹180 per share, irrespective of the news and financial reports released by the company.
Can We Sell Shares In Upper Circuit?
As mentioned above, stocks in the upper circuit have only buyers and no sellers. This means that traders and investors who held the stock before it hit the upper circuit are the only ones who can sell shares in the upper circuit.
So if you held or bought the shares before they hit the upper circuit, then yes you can sell the shares.
Important Facts About Upper & Lower Circuit
If a stock hits the upper circuit – There will only be buyers and no sellers.
Likely if it hits the lower circuit – There won’t be any buyers and the stock will only have sellers.
The circuit filters are applied based on the previous day’s closing price.
To find the circuit filters, you can check the stock exchange website. (NSE & BSE)
When prices of shares move drastically, they tend to wipe out investor wealth within hours if not for circuit breakers. This is why they are implemented in the stock exchanges. With this, we conclude our blog on “ Can we sell shares in upper circuit”. Happy investing!
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