Market regulator Sebi today asked stock exchanges to calculate circuit limits -- the maximum permissible movement allowed to Sensex or Nifty in a trading session -- on a daily basis as against the current practice of doing the same on a quarterly basis.
Currently the stock exchanges calculate the circuit filters on the basis of the level attained by Sensex and Nifty at the end of every quarter and the same limits are applicable for every day of trade for the next three months.
The new calculation would apply for 10 per cent, 15 per cent and 20 per cent circuit limits in Sensex and Nifty, the two benchmark indices of Indian stock market, with effect from October 1, 2013. While 10 per cent and 15 per cent limits result into temporary trading halts, a 20 per cent movement triggers into trading getting halted for the entire day.
The move assumes significance in the wake of rising volatility in stock markets. For example, the 10 per cent circuit limit for Sensex in the current quarter is fixed at 1,950 points, while 15 per cent limit is at 2,900 points and 20 per cent limit is 3,875 points.
These limits were fixed as per the closing value of Sensex at the end of previous quarter, April-June 2013.
However, the circuit limits would be much lower if they are calculated on the basis of previous day closing levels.
For example, the Sensex today closed at 18,235 points and therefore the 10 per cent circuit filter would stand at 1,823 points for tomorrow's trade.
Announcing the new guidelines, Sebi said: "The stock exchange on a daily basis shall translate the 10 per cent, 15 per cent and 20 per cent circuit breaker limits of market-wide index variation based on the previous day's closing level of the index".
Sebi further said that the stock exchange should resume trading in stocks with a 15-minute pre-open call auction session, after any trading halt.
In order to accommodate such pre-open call auction session, the extant duration of the market halt would be suitably reduced by 15 minutes, Sebi said.
Under the circuit breaker system, a rise