The NSE and BSE have established price bands for all securities, serving as boundaries for Stock trading. The Exchange does not accept orders outside the minimum and maximum price range for any Stock.
The purpose of price bands and circuit breakers is to control mass buying or selling, preventing the market from spiraling in one direction and curbing panic selling.
Most Stocks on the NSE and BSE fall into five categories of price bands:
If a Stock has Derivative products listed or is included in an Index with Derivative products, it does not have an upper or lower price band.
A stock can have price bands of 20% either way, based on the previous day's closing price.
A stock can have price bands at 10% either way, based on the previous day's closing price.
A stock can have price bands at 5% either way, based on the previous day's closing price.
A stock can have price bands at 2% either way, based on the previous day's closing price.
Additionally, a marked wide "price band" is implemented through the circuit breaker system. On the BSE, the Sensex is used, while on the NSE, the Nifty. The circuit breaker system is applied at three stages of Index movement: at 10%, 15%, and 20%.
In different scenarios:
For a 10% movement, a one-hour market halt occurs before 1:00 PM. If the movement occurs at or after 1:00 PM and before 2:30 PM, a 30-minute trading halt is imposed. If the movement occurs at or after 2:30 PM, no trading halt is imposed.
For a 15% movement, a two-hour market halt occurs before 1:00 PM. If the movement occurs at or after 1:00 PM and before 2:00 PM, a one-hour trading halt is imposed. If the movement occurs at or after 2:00 PM, trading is halted for the rest of the day.
For a 20% movement, trading is halted for the rest of the day.