What does circuit limits i.e price bands mean?

Circuit limits, also known as price bands, are the maximum amount a stock price can move up or down in a single trading session. The price bands are determined by stock exchanges like the NSE and are typically calculated as a percentage of the previous day's closing price. The circuit limits price ranging from 2%, 5%,10% & 20%. When stock price reaches to it’s maximum or minimum price band, the stock price halted for a certain period of time.

For Ex.: A stock may have an upper circuit limit of 5% and a lower circuit limit of 10%, which means that the price can't increase or decrease by more than 5% or 10% respectively in a single day. The purpose of circuit limits is to prevent excessive volatility and safeguard the stability of the market.

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