What is Upper Circuit ?

An upper circuit is the highest price a stock can reach in a single Trading day, as decided by the stock exchange. It hits the limit due to excessive buying, and there are only buyers but no sellers for the stock. In such cases, trading is paused to control price fluctuations and prevent manipulation.

Stock exchanges set higher circuit limits at 5%, 10%, or 20%, depending on the category of the stock. This ensures a smooth and controlled trading environment. While an upper circuit indicates strong bullish sentiment, it can also create liquidity problems, making it hard for investors as there are no sellers available.