Definition
Market-Wide Circuit Breaker
A market-wide circuit breaker halts trading across all equity and derivatives segments when a benchmark index moves beyond preset thresholds, giving the market time to absorb information and cool down.
In India, the market-wide circuit breaker triggers at 10%, 15% and 20% moves in either the Nifty 50 or the BSE Sensex, whichever breaches first. Each level imposes a trading halt of a defined duration (longer later in the day), after which the market reopens following a pre-open call auction.
Unlike individual-stock price bands, this system-wide halt is designed to prevent panic-driven cascades during extreme events, as seen during major global shocks. The graded thresholds and time-of-day-dependent halt durations are specified by SEBI and applied uniformly across both exchanges.
Related terms
- Pre-Open SessionThe pre-open session is a short window before regular trading begins, during which orders are collected and a single opening price is established through a call auction to absorb overnight information.
- Price BandA price band is the maximum permissible price movement, expressed as a percentage above and below a reference price, within which a security may trade during a session before being frozen.
- Dynamic Price BandA dynamic price band is a flexible price collar, used mainly in the derivatives and high-band cash segments, that can be relaxed in steps during the day when genuine demand pushes prices to the limit.
- Index Circuit BreakerAn index circuit breaker is the threshold-based trading halt applied when a benchmark index such as the Nifty 50 or Sensex moves by a specified percentage, pausing trading market-wide.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.