Circuit Breaker in NEPSE – Everything You Need to Know

What is a circuit breaker in Nepse

Circuit Breaker in NEPSE

What is a circuit breaker in Nepse?

A circuit breaker is a rule adopted by Nepal Stock Exchange to control unreasonable price fluctuation.  If NEPSE index fluctuates 4 % within the first hour of regular trading i.e before 12 pm, trading will be suspended for 20 minutes. If Nepse fluctuates by 5 % within the second hour i.e 1 pm, trading is suspended for another 40 minutes as a second circuit. After that, if the market index fluctuates by 6 %, all transactions for the rest of the day will be suspended.

This halt gives market investors to analyze events, news, announcements and take a necessary rational decision.

NEPSE has implemented an index-based circuit breaker from 21 Sep 2007.  A circuit breaker is a market stabilizing tool used to check sudden rise/fall in the index. The circuit breaker rule was first introduced in the United States in 1987 when Dow Jones Industrial Average (DJIA) plummets 22% in a single day “The Black Monday.” Usually, index-based circuit breakers apply for three levels.

Nepse Circuit Breaker Rule

Circuit breaker rule in NEPSE

Circuit for Individual Stock

There is another concept in Nepse trading, if the price of the individual company increase or decreases by 10% in a single day, it is called circuit-level trading. For example, the price of the ABC scrip can increase or decrease only by 10%. If it increases by 10% it is called a positive circuit and if the price decrease by 10%, it is called a negative circuit.

Note – The trading of stock will not be halted even after a positive or negative circuit like in the NEPSE index. 

circuit of individual stock

History of Circuit Break in NEPSE

DateIndexIncrease %Turnover (crore)
MAR 4, 20242,078.006%37
DEC 10, 20231,963.98648
DEC 14, 20212418.856.01184
JUL 19,20201479.036.046
JUL 1,20201336.526.0140
JUNE 30,20201260.756.0622

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