In NSE, a price band sets the allowable range for a security's price changes during a trading day, preventing extreme volatility and ensuring fair trading.
- A price band is a percentage limit (ranging from 2% to 20%) applied to a security's price.
- It sets an upper and lower limit for the price of a stock on a given day, based on its previous day's closing price.
- If a stock's price reaches either the upper or lower circuit limit, trading is halted for that day.
Example of a Price Band:
If a stock is trading at ₹200 with a 10% price band, its price range for the day will be:
- Upper Limit (₹220) → No buying allowed above this.
- Lower Limit (₹180) → No selling allowed below this.
How it works:
- Daily determination: The price band for a security is determined daily by the NSE based on the security's previous day's closing price and other factors, such as market liquidity and volume.
- Circuit limits refer to the upper and lower limits of the price band.
- Trading halts: When a stock reaches either the upper or lower circuit limit, trading in that security is temporarily stopped or remains halted for the remainder of the day.
