How are investors protected?
What is lower or upper circuit limit?
It is the automatic defense mechanism to protect the share market from a freefall or a massive surge in the market.
When is it enforced?
It is triggered in 3 stages when the share market falls or rises by 10%, 15%, and 20%. The automatic circuit breakers halt the market wide trading. It is triggered by the movement in either BSE Sensex or Nifty 50.
What is the duration of halt?
It depends on the time of the freefall or surge.
Why is circuit limit used?
It is used to protect the investors and the companies from unwanted surges and falls. Suppose that the stock you hold is being played by some people for their benefit. They spread rumours in the market to ensure that the stock falls in value. Next, suppose that it falls over 50% in a single day. That will mean a lot of loss to you, a small investor.
This is why the stock exchanges work to ensure that large players are not able to benefit at the cost of the small investors.