The stock market is famed for its volatility, and market participants anticipate volatility. Indeed, the notion of the stock market is mainly motivated by the desire to profit from long-term and short-term swings in stock values. Nevertheless, what if this volatility exceeds the regulated range, resulting in unprecedented profit/loss and irregular stock movements? Let's take a deep dive into how to sell lower circuit shares.
Circuits are a way for SEBI to help regulate the stock market to protect investors and maintain stability. The lower circuit limits how much a stock's price can drop in a day — before trading in that stock is temporarily halted. A lower circuit will rescue if a stock responds strongly to a bad news update and enters panic selling stock when investors dump their stakes.
The lower circuit will prevent the stock from falling any more on that particular day by more than a specified percentage. If the lower circuit for a stock is set at 20%, no additional selling stock will be permitted in that trading session when the stock's price falls by 20%. But before we know how to sell shares in lower circuit, let us understand why.
Stocks may fall for various causes, including industry selling or a domino effect of index-wide selling. It can be due to a bad news event about a particular stock, such as the interruption of a prospective acquisition for the firm or the departure of senior key management individuals.
It can be due to large AMCs/investors withdrawing their interests or DIIs (domestic institutional investors ) /FIIs (foreign institutional investors) making block trades. The potential of an operator game cannot be ruled out. Thus the reason might be anything, and by the time you figure out what caused the fall, the harm has already been done.
Whether you are a newbie or a long-term investor, having a deeper knowledge of the market is vital. Avoiding the lower circuit stock is best since extended exposure can result in a significant loss. Placing an order at the pre-open session is the most convenient and straightforward technique for breaking out and selling a lower circuit stock. At 9 AM, you should place a sell order in the pre-market.
Since the market is volatile, trading on the lower circuit is normal. It goes through a lot of ups and downs daily. According to SEBI regulations, certain breakers are allocated to control random fluctuations and changes, and the lower circuit limit is also established.
There have been several occasions in recent years when the market has plummeted owing to a violation of limitations. Hence, even after a lot of research, if you get caught in the lower circuit, it's best to exit it as quickly as possible, putting the sell order in place beforehand.
In conclusion, lower circuits play a crucial role in regulating the stock market and safeguarding investors' interests. By imposing limits on how much a stock's price can drop in a day, lower circuits prevent excessive panic selling and ensure stability in the market. Stocks may hit the lower circuit due to various reasons, including bad news events, industry selling, or large investors withdrawing their interests. Selling stock under the lower circuit requires careful planning, and placing a sell order during the pre-open session is a recommended approach. While the market can be volatile, understanding the dynamics and promptly responding to lower circuit situations can help mitigate potential losses.
Investors must employ fundamental indicators such as P/E ratios to make sound decisions. You can do so by using Fi Money. Fi, in collaboration with its SEBI-registered investment advisor, epiFiWealth, provides the necessary assistance and opportunities to begin your investing journey.
You won't be able to sell your shares without buyers; you'll be stuck with them until there is some purchasing interest from other investors. A buyer may appear in seconds or take weeks for exceptionally lightly traded securities.
When a stock reaches a lower circuit, trading in that stock is temporarily halted, preventing it from falling any further for the remainder of the trading session. This measure aims to control panic selling and stabilise the stock's price.
It is possible to create a Demat account via Depository Participants without a broker but to engage in stock market transactions. You'll need to open a trading account with the helminutes, days, or p of a SEBI-licenced broker/sub-broker.