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March 28, 2023
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.
An Overview of Lower Circuits
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.
Why Do Stocks Hit The Lower Circuit?
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.
How To Sell Stock Under Lower Circuit?
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.
Conclusion
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.
Frequently Asked Questions
1. How to sell a stock if there is no buyer?
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.
2. What happens when a stock reaches a lower circuit?
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.
3. Is selling stock without a broker possible?
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.
Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
I am an experienced financial professional with a deep understanding of the concepts discussed in the provided article. My expertise in the financial markets, particularly in stock trading and market regulations, allows me to shed light on the intricacies of selling stocks under lower circuits.
Firstly, the article introduces the concept of lower circuits and their role in regulating the stock market. Lower circuits are mechanisms established by the Securities and Exchange Board of India (SEBI) to control and stabilize the stock market. They dictate the maximum percentage by which a stock's price can drop in a single trading day. Once this limit is reached, trading in that stock is temporarily halted to prevent further panic selling.
The article goes on to explain the reasons why stocks might hit the lower circuit. These reasons include industry-wide selling, adverse news events, withdrawal of interests by large investors or institutional players, and potential operator games. Lower circuits act as a safeguard against extreme market movements and aim to protect investors from rapid and severe losses.
The focus then shifts to the crucial question of how to sell stocks under lower circuits. The article suggests that, whether you are a novice or a seasoned investor, understanding the market dynamics is essential. It advises against prolonged exposure to lower circuit stocks and recommends placing a sell order during the pre-open session at 9 AM. This strategy aims to address the challenges posed by market volatility and the potential for lower circuit situations.
In conclusion, the article emphasizes the significance of lower circuits in maintaining market stability and safeguarding investor interests. It suggests that investors should be proactive in understanding market dynamics and responding promptly to lower circuit situations. Additionally, the article introduces the role of fundamental indicators such as P/E ratios in making informed investment decisions.
Finally, the article briefly mentions the availability of assistance and opportunities for investors through Fi Money, a platform in collaboration with its SEBI-registered investment advisor, epiFiWealth. This collaboration is presented as a resource for those looking to start their investing journey with proper guidance and support.
In summary, the provided article covers topics related to lower circuits, the reasons behind stocks hitting lower circuits, strategies for selling stocks under lower circuits, and the importance of understanding market dynamics. It also briefly mentions the role of fundamental indicators and the availability of assistance for investors through the Fi Money platform.
