Stock Market Crash: Leading Indian share market indices – the BSE Sensex and Nifty 50 – saw a massive fall on Monday morning as both of them fell over 4 per cent, the biggest fall since the decline during the coronavirus (COVID-19). Such a fall was after the global sell-off, where trading in Japan on Monday was suspended for some time because the circuit breaker was triggered. Earlier, US markets – Dow Jones and S&P 500 FUT – also slipped by 4 per cent each.
The Nikkei 225 index fell nearly 8 per cent in early Tokyo trade, extending losses after a 2.75 per cent drop on Friday.
The Kospi index in Seoul, meanwhile, fell by 4.8 per cent. China’s blue-chip CSI300 index slipped by 4.5 per cent, while Hong Kong’s Hang Seng index slid 8 per cent.
Amid such negative news for investors across Asia, the thought that crossed the minds of many investors was whether, as in the case of stocks, a trigger, or circuit breaker, or lower circuit can be applied to the Nifty 50 and the BSE Sensex.
If yes, at what level will the lower circuit be triggered? On the other hand, what if the market rises up to a certain level? Can the upper circuit also be triggered?
What is a circuit breaker?
When there is a sharp fall or rise in the market, the stock exchange implements an automated system called a ‘circuit breaker’ to control it.
Its purpose is to prevent sudden panic and stabilise the market.
The Japan Exchange Group (JPX), which includes the Tokyo Stock Exchange, Osaka Exchange and Tokyo Commodity Exchange, uses circuit breakers in such cases.
What will happen if a lower circuit is applied in Indian stock market?
Likewise, the circuit breaker system is also applicable in the Indian share market. When such a circuit is applied to Nifty or Sensex, trading is temporarily stopped. But when will such a trigger be implemented? Read rules to know that –
If BSE Sensex, Nifty fall by 10%
1. If the BSE Sensex of Nifty fell by 10 per cent before 1 pm, trading will be closed for 45 minutes.
2. If it happens between 1 pm and 2:30 pm, there will be a halt of 15 minutes.
3. If the circuit is applied after 2:30 pm, trading can be closed for the whole day.
If BSE Sensex, Nifty fall 15%
If there is a 15 per cent fall before 1 pm, trading will remain closed for 1 hour 45 minutes.
If a circuit is hit between 1 and 2 pm, there will be a 45-minute break.
And if it happens after 2 pm, the market will remain closed for the whole day.
If BSE Sensex, Nifty fall 15%
If there is a fall of 20 per cent, trading is stopped for the whole day.
If a circuit is hit on either NSE or BSE, the rule applies to both exchanges.
After the halt, the market reopens through a 15-minute pre-open session.
