Understand what circuit breakers are in the Indian stock market, how they work, and their role in preventing panic selling.
Ever wondered what happens when the stock market crashes suddenly? That’s when circuit breakers come into play. These tools are designed to pause trading temporarily and restore calm during extreme market fluctuations.
“What Are Circuit Breakers? Understanding Stock Market Halts In India”
Circuit breakers are systems that stop trading in the stock market for a short while if prices go beyond predetermined levels. This is to avoid panic selling or irrational buying and provides investors with time to evaluate the situation
How circuit breakers work in stock market
The Stock Market’s Safety Net: Why Circuit Breakers Are So Important
Circuit breakers protect both retail and institutional investors. They:
- Prevent sudden crashes : They serve as a period of cooling down during wild market movements.
- Allow for rational decision-making : market movements. Give a fair opportunity for all investors to digest information.
- Maintain overall market stability : information. Assist in orderly price discovery during turmoil.
How Do Circuit Breakers Work in India? A Simple Explanation for Investors
SEBI has established certain levels for market-wide circuit breakers depending on the movement of benchmark indices such as the Nifty 50 and BSE Sensex. These levels are:
- 10% Movement: Causes a trading halt depending on the time of violation.
- 15% Movement: Extended trading halts with certain reopening procedures.
- 20% Movement: Trading is suspended for the rest of the day.
Table: Market-Wide Circuit Breaker Thresholds
| Index Movement | Time of Breach | Trading Halt Duration | Reopening Method |
| 10% | Before 1:00 PM | 45 Minutes | Pre- Open Session |
| 10% | 1:00 PM to 2:30 PM | 15 Minutes | Pre- Open Session |
| 10% | After 2:30 PM | No halt | No halt |
| 15% | Before 1:00 PM | 1 Hour 45 Minutes | Pre- Open Session |
| 15% | 1:00 PM to 2:00 PM | 45 Minutes | Pre- Open Session |
| 15% | After 2:00 PM | Remainder of the Day | Market Closed |
| 20% | Any Time | Remainder of the Day | Market Closed |
Real – World Example:
On March 13, 2020, the Indian market experienced a sharp decline because of concerns for global pandemics. The Nifty 50 index dropped more than 10%, which led to the triggering of a circuit breaker and suspending trading for 45 minutes. This halt provided investors with a chance to absorb information and assisted in stabilizing the market when it reopened.
Stock-Specific Circuit Breakers
In addition to market – wide rules, individual stocks also have circuit limits like:
- 2%
- 5%
- 10%
- 20%
Highly liquid and derivative-backed stocks may not have these limits.
Example
| Stocks | Circuit Limit |
| Stock A (High Volatility) | 20% |
| Stock B (Medium Volatility) | 5% |
| Stock C (Low Volatility) | 2% |
How Circuit Breakers Safeguard Your Stock Portfolio: Key Benefits Explained
- Investor Protection: Gives time to react rationally
- Market Integrity: Keeps extreme volatility in check
- Time for News Analysis: Allows evaluation of news or data triggers
Limitations Of Stock Market Circuit Breakers: A Comprehensive Analysis (2025)
- May delay Natural Price Discovery
- Doesn’t solve root cause of panic
- Traders may game the system
Real-Life Example: March 2020 Crash
On March 13, 2020, the Nifty 50 dropped over 10% due to COVID-19 panic. Trading was halted for 45 minutes, allowing stability to return.
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