What will happen to my intraday (MIS/CO) position in case the stock circuit limits are hit?

Circuit limits, the ban of intraday traders' existence. Circuit limits are price limits set by stock exchanges to prevent excessive price fluctuations. When a stock hits its circuit limit, trading in that stock is halted for a period of time.

Here are some hypothetical situations and their results:

The stock hits the upper circuit while you still have a sell trade active for the day. In such circumstances, the market will only be populated by buyers. As a result, you won't be able to purchase the position back; instead, it will have to be converted to delivery and settled at auction. On T-day, a margin equal to 120% of the closing price of the stock will be frozen in your trading account. Any of the following can result in an auction settlement:

1. Internal settlement means that the trade is settled within the stock exchange itself, on the next trading day (T+1). The settlement price will be the highest bid price from the previous trading day.

2. External settlement, the trade is settled by the exchange itself, also on T+1, but at a predetermined price. The max penalty for auction shortage is 20%. In a nutshell, internal settlement is faster and more predictable, but external settlement provides more price certainty and a limit on auction shortage penalties.

The stock reaches the lower circuit while you still have a buy position active for the day. The shares you purchased cannot be sold, and your position will be changed to delivery. To have the shares sent to your Demat account, you must have sufficient cash in your account. If not, you can add money or sell other assets to make up the difference. If you don't, we'll liquidate your assets to pay back our debts.

We advise you to constantly monitor your intraday positions and close them out before the market closes in order to prevent such circumstances.

Click here to know more about circuit breakers.