Circuit breaker hits Nifty First

Mumbai, May 22 (UNI) It was once again a 'terrible Monday' in the month of May, when the market went berserk but nothing like this had ever occured before and the market crash was so huge, only a circuit breaker could reduce the 'pounding' of it.

Accordingly, the one hour stoppage of trading today was enforced on two premier bourses--Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)-- after 10 per cent plunge in the NSE, which recorded a fall of 350 points on S&P CNX Nifty even though BSE Sensex was still below the circuit level of 1125 points with a fall of 1111.70 points.

Is that all, in the sense, has the market bottomed out with the today's fall? No one is willing to bet on that. Though the Finance Minister says, ''The Funadementals are strong and there is ample liquidity to attend the margin calls.'' When the trading was stopped, BSE Sensitive Index (Sensex) had fallen by 1,111.70 point loss which was just short of the prescribed circuit breaker limit of 1125 points, as the market wide circuit breakers would be triggered by movement of either SENSEX or the NSE S&P CNX Nifty whichever is breached earlier as per the SEBI guideline.

The circuit breaker was applied on the basis of 350 point or 10 per cent fall hitting first on the National Stock Exhange (NSE) S&P CNX Nifty index.

The market regulator SEBI implements index based market wide circuit breaker system on quarterly basis. This brings about a co-ordinated trading halt in all equity and equity derivative markets nationwide.

The system is applicable at three stages of the index movement either way at 10 per cent, 15 per cent and 20 per cent.

The market wide circuit breakers is triggered by movement of either SENSEX or the NSE S&P CNX Nifty whichever is breached earlier, says SEBI guideline.

In case of a 10 per cent movement of either of these indices, there has to be a 1-hour market halt if the movement takes place before 1300 hrs.

In case the movement takes place at or after 1300 hrs but before 1430 hrs there has to be a trading halt for half an hour.

In case the movement takes place at or after 1430 hrs there will be no trading halt at the 10 per cent level and the market will continue trading.

In case of a 15 per cent movement of either index, there will be a two-hour market halt if the movement takes place before 1300 hrs.

If the 15 per cent trigger is reached on or after 1300 hrs but before 1400 hrs, there will be a one hour halt.

If the 15 per cent trigger is reached on or after 1400 hrs the trading will halt for the remainder of the day.

In case of a 20 per cent movement of the index, the trading will be halted for the remainder of the day.

The percentages are calculated on the closing index value of the quarter. These percentages are translated into absolute points of index variations (rounded off to the nearest 25 points in case of SENSEX).

At the end of each quarter, these absolute points of index variations are revised and made applicable for the next quarter.

On March 31, 2006, the last trading day of the quarter, SENSEX closed at 11,279.96 points which led to 1125 points or 10 per cent fall as the mark when the circuit breaker would be applied.

The next circuit breaker is to be applied at 1700 points or 15 per cent fall and still further at 2250 point or 20 per cent fall.

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