Price Band
A price band (also called a daily price range or circuit limit) is the maximum permissible intraday price movement for a security, expressed as a percentage above and below the previous day's closing price, beyond which trading in that security is suspended for the day.
Price bands are one of the most practically important rules in India's equity market that every investor needs to understand. They determine how much a stock's price can move in a single trading session and directly affect whether you can execute a trade at your desired price.
NSE and BSE apply individual stock-level price bands of 2%, 5%, 10%, or 20% depending on the security. Most actively-traded, liquid large-cap stocks have a 20% circuit limit — they can rise or fall up to 20% from the previous close before hitting their upper or lower circuit respectively. Stocks under Additional Surveillance Measure (ASM) or Graded Surveillance Measure (GSM) may have tighter bands of 2% or 5% to limit speculative activity.
When a stock hits its upper circuit, no seller needs to sell at a lower price, so no more trades occur (unless sellers are willing). The order book shows only buy orders at the circuit price. When a stock hits its lower circuit, no buyer needs to buy at a higher price, so no trades occur (unless buyers emerge at the circuit price). This is different from index-level circuit breakers (15%, 20%, 25% triggered on Nifty/Sensex) which halt trading in the entire market.
For investors, hitting a circuit can be both a risk and an opportunity signal. A stock repeatedly hitting its upper circuit over multiple days reflects overwhelming demand. A stock stuck at its lower circuit for extended periods may signal distress or massive selling pressure that cannot find buyers.
Newly listed IPO stocks do not have any price band on their first day of trading, allowing the market to discover the true value without artificial restrictions. This is why large IPO listing gains or losses — sometimes 50-100% or more — are possible on day one.
The Government of India's securities (G-Secs) and other fixed income instruments do not have stock-style price bands; their prices are determined by interest rate movements. Index futures have their own price band rules set by the exchange, typically within a specified range around the fair value of the index.