Circuit is a term which we often come across while investing in the markets. It is referred to as the process whereby trading get held-up in certain stock or Sensex/Nifty itself.
In the stock market, circuit is a term used to contain the extra fluctuation in prices of a certain stock or index in a single session. Circuit is of two type, one is upper circuit and the other is lower circuit. Circuit implements in three steps in the Sensex and Nifty. It is 10% in first step, 20% in second step and 30% in third and final step. If Sensex or Nifty changes very fast in a session and passes 10%, 20% and 30% in a certain pre-defined time, the business in stock market get held for some time and this time-period is known as the cooling-off period. Other important is that if a circuit is takes place in a stock market say Sensex, the other stock market (Nifty) too will be held automatically or vice-versa. Stock’s price fluctuation, the average daily stock turnover and price history of the stock are the basic data used to calculate the circuit.
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