Market crash: What are circuit filters for the Sensex, Nifty? Explained

Stock market crash: Indian equity markets posted one of the worst openings since COVID on Monday, dragged down by the global selloff amid US President Donald Trump's tariff hikes and the backlash from China. The 30-share Sensex tanked 3,939.68 points, or 5.22 per cent, to the intraday low of 71,425.01. The NSE Nifty 50, on the other hand, plunged 1,160.8 points, or 5.06 per cent, to an intraday low of 21,743.65 during Monday’s intraday trade. The sharp fall in these benchmark indices has raised concerns about the activation of circuit breakers.

 

Here's how the circuit breakers function in the Indian equity market:  

According to the NSE, the index-based market-wide circuit breaker system applies at three stages of index movement, either way—at 10 per cent, 15 per cent and 20 per cent. These circuit breakers, when triggered, bring about a coordinated trading halt in all equity and equity derivative markets nationwide. "The market-wide circuit breakers are triggered by the movement of either the BSE Sensex or the Nifty 50, whichever is breached earlier, " reads the NSE circular.  

Also Read: Sensex, Nifty crash on 'Black Monday' - Why stock market is falling today?

 

The market, it says, will reopen after the index-based market-wide circuit filter is breached, with a pre-open call auction session.

 

Notably, when the index moves by 10 per cent, the market halt duration depends on the time of day. If the movement occurs before 1 PM, a 45-minute trading halt is triggered. If it happens between 1 PM and 2:30 PM, the markets pause for 15 minutes. However, if the 10 per cent breach occurs after 2:30 PM, there is no halt, and trading continues as usual.

 

In the event of a 15 per cent move, the pause is longer. If triggered before 1 PM, trading halts for 1 hour and 45 minutes. Between 1 PM and 2 PM, the markets will remain shut for 45 minutes, and after 2 PM, the trading halt is limited to 15 minutes.

 

The most severe trigger—a 20 per cent movement in the index—leads to an immediate halt for the rest of the trading day, irrespective of the time it happens. This is the strictest circuit breaker and is designed to restore order and allow market participants to assess the situation overnight. 

(Source: NSE: https://www.nseindia.com/products-services/equity-market-circuit-breakers)