What is Circuit Breakers in stock market in India : Stock market is not stable. Everytime price of each stock is fluctuating. So the whole stock market is volatile.
To decrease the volatility of the whole stock market or individual stock a new system was launched in stock market. The principal of circuit breaker in electricity is used in this system.
We see circuit breaker in our home. When current is either up or down from the set limit in our home the circuit is automatically break.
Nifty and Sensex,the two main indices of stock market in india have circuit breakers. Every stock has price bands like circuit breaker.
if before 1:00 pm nifty or sensex is either up or down 10% from the previous day closing price then stock market will be closed for 45 minutes.
After 45 minutes pre opening session (check stock market timings in india) will start and then normal trading session will start.
At 12:45 pm pre-opening session will start and next normal trading session will start at 1:00 pm. Circuit breaker helps to reduce the extreme volatility or to keep price movement in specific range.