Bid, ask, market depth and liquidity (India)

🎯 In 30 seconds: The bid is the best price a buyer is offering right now. The ask (or offer) is the best price a seller wants. The gap is the spread, and you pay it every time you buy and later sell. Market depth shows the five best bids and offers and how many shares wait at each. Liquidity is how much you can trade without moving the price. In a busy large company a ₹30,000 round trip through the spread costs a few rupees. In a thin small company it can cost ₹900, about 3%, before any charges. Stocks stuck at a circuit limit, and stocks in the trade-for-trade segment, add traps of their own.

The sabzi market version

At a vegetable market, the vendor buying onions from farmers in the morning pays one price and sells to you at a slightly higher one. If you bought a kilo and immediately tried to sell it back, you would get less than you paid. That gap is how the vendor earns a living.

On NSE and BSE there is no single vendor. Thousands of people place buy and sell orders, and the exchange's order book lines them up. But the gap is still there: the best price anyone will pay you is below the best price anyone will sell to you. Buy and sell straight away and you lose the gap.

The quote: bid, ask and spread

Every stock has two live prices, not one:

Bid: the highest price in the book from someone who wants to buy, and how many shares they want.
Ask (offer): the lowest price in the book from someone who wants to sell, and how many shares.
Spread: ask minus bid.
Midpoint: halfway between them, a fair estimate of the price right now.

The last traded price (LTP) on your screen is neither of these. It is the price of the most recent trade, which might be a second old or an hour old in a quiet stock.

To compare stocks at different prices, express the spread as a percentage of the midpoint:

Spread % = (ask − bid) / midpoint x 100

A 20 paise spread on an ₹820 stock (bid ₹819.80, ask ₹820.00, midpoint ₹819.90) is 0.20 / 819.90 = about 0.024%. A 90 paise spread on a ₹60 stock (bid ₹59.20, ask ₹60.10) is about 1.5%. The second stock costs you 60 times as much, in percentage terms, every round trip.

The spread can never be smaller than the stock's tick size, the smallest price step the exchange allows. Since April 2025 NSE's tick is 1 paisa below ₹250 and 5 paise from ₹250 to ₹1,000, rising in steps for higher prices. Order types in depth has the table.

Market depth: the five best on each side

Indian broker apps show a market depth panel: the five best bid prices and the five best ask prices, the quantity at each, and often the number of orders behind each quantity. NSE also sells deeper data feeds to brokers and vendors, but five levels is what most screens show.

Here is a hypothetical depth panel for Kaveri Pharma Ltd, a busy large company:

The top row on each side is the quote you see on a basic screen. The rows behind it show how far the price would move if a large order arrived. Bars are scaled to quantity.

Many quote screens also show total buy quantity and total sell quantity: all the shares waiting in the book on each side, not only the top five levels. Some traders read a big imbalance as a signal. Treat it with caution. Orders can be cancelled in an instant, large orders can hide most of their size with a disclosed quantity, and the totals include orders priced far from the market that may never trade.

Slippage: what a large order does

Slippage is the gap between the price you expected and the average price you actually got. It comes from the spread, from the price moving while your order travels, and from your own order eating through the levels of the book.

Worked example (hypothetical, using the book above). You send a market order to buy 2,000 shares of Kaveri Pharma. The best ask is ₹820.00, but only 350 shares are there.

350 shares at ₹820.00	₹2,87,000
900 shares at ₹820.05	₹7,38,045
750 shares at ₹820.10	₹6,15,075
Total for 2,000 shares	₹16,40,120
Average price: ₹16,40,120 / 2,000	₹820.06
Slippage vs the ₹820.00 ask: 2,000 x ₹0.06	₹120
Cost vs the ₹819.90 midpoint: 2,000 x ₹0.16	₹320

Sell the same 2,000 shares straight back into the bids and you average about ₹819.75. The round trip on a ₹16.4 lakh position costs about ₹620, roughly 0.04%, before any charges. In a busy stock even a large order barely moves the price.

The same trade in a thin small company

Now take Malabar Spices Ltd, a hypothetical small company that trades a few thousand shares a day. Its depth looks like this:

Bid qty	Bid ₹	Ask ₹	Ask qty
150	59.20	60.10	120
80	58.90	60.40	200
300	58.50	60.90	90
100	58.00	61.50	400
500	57.40	62.00	250

The spread is 90 paise, about 1.5% of the ₹59.65 midpoint. Buy 500 shares at market and you walk up four levels for an average of ₹60.62, a total of ₹30,308. Sell them straight back and you walk down three levels for an average of ₹58.77, getting ₹29,387. You lose ₹921, about 3%, without the price having moved at all.

A position 50 times smaller cost more in rupees to get in and out of, because the thin book has so little at each price. Add statutory charges on top of both.

That 3% comes on top of about 0.2% STT on a delivery round trip and the other charges in What trading really costs. A swing trade in this stock has to rise well over 3% just to break even if you trade at market.

Impact cost: NSE's liquidity yardstick

NSE Indices uses a number called impact cost to judge how liquid a stock is. It is the percentage mark-up you would pay over the "ideal" price, the midpoint of the best buy and best sell, when you execute an order of a given size.

Impact cost = (actual average price − midpoint) / midpoint x 100

In the Kaveri Pharma example, (₹820.06 − ₹819.90) / ₹819.90 = about 0.02% for a ₹16.4 lakh order. In Malabar Spices, (₹60.62 − ₹59.65) / ₹59.65 = about 1.6% for a ₹30,000 order.

Impact cost is one of the tests a stock must pass to enter the Nifty 50. As of the September 2026 methodology, a stock needs an average impact cost of 0.50% or less over the previous six months, for 90% of the observations, for a portfolio of ₹10 crore. Index stocks are, almost by definition, the most liquid in the market. Most listed companies are far less liquid than that.

How to judge liquidity yourself

Average daily traded value. Shares traded per day times price, averaged over a month or more. A stock trading ₹50 crore a day absorbs a ₹50,000 order without noticing. One trading ₹5 lakh a day does not.
Spread % from the formula above. Check it at different times: just after 9:15, at midday and near the close.
Depth at the top five levels. Add up the quantity on each side and compare it with your order size. If your order is bigger than the first two or three levels, you will move the price.
Delivery percentage. How much of the day's volume ended in actual delivery. Covered in Volume and delivery percentage.
Days with no trades. If the price chart has flat stretches or gaps on ordinary days, buyers and sellers are scarce.

A two-number check before you trade

Keep your order below about 1% of the stock's average daily traded value, and below the quantity in the top two levels on the side you are trading against. If the spread is above about 0.5%, use a limit order at a price you choose rather than a market order. These are rules of thumb, not exchange rules, but they keep most beginners out of the worst fills.

Circuit limits: when one side of the book disappears

Most Indian stocks have a price band, a maximum move allowed in a day, set by the exchange as a percentage of the previous close. When a stock hits the top of its band it is at its upper circuit. When it hits the bottom it is at its lower circuit.

Trading does not stop, but orders outside the band are rejected. So at the upper circuit you see a long queue of buyers at the limit price and few or no sellers. At the lower circuit you see sellers queued at the limit price and almost no buyers. The depth panel shows it plainly: one side is full, the other side is empty.

The trap: a lower circuit you cannot get out of

Hypothetical: you hold 1,000 shares of a ₹40 small cap with a 5% band. Bad news hits and it opens locked at the lower circuit of ₹38, with sell orders for 4 lakh shares queued there and buy orders for 2,000. Your sell order joins the back of the queue. Tomorrow it may lock again at ₹36.10, then ₹34.30. Your stop-loss cannot help when there is nobody to sell to. The reverse also happens: a stock locked at its upper circuit can show a large paper gain that you cannot capture because no one will sell to new buyers or bid high for your shares the next day. Value thin positions at the price you could actually sell at, not the last traded price.

Stocks with futures and options have no fixed band. They have dynamic bands that start at 10% and widen in steps if trading pushes against them. Bands and circuit breakers are covered in The rules every Indian trader runs into.

Trade-for-trade, surveillance and call auctions

The exchanges move some stocks into special segments, usually because of surveillance concerns, low liquidity or compliance problems at the company:

Trade-for-trade segment. On NSE these stocks appear with the series BE instead of the usual EQ. Each trade is settled on its own by delivery, with no netting of buys against sells. In practice that means no intraday trading: if you buy, you take delivery; if you sell, you must deliver shares. The exchange often gives them a narrow price band, such as 5%.
Surveillance frameworks (ASM and GSM). Stocks under additional or graded surveillance can face extra restrictions set by the exchanges, such as higher margin requirements. Your broker usually flags them on the quote screen. Details are in The rules every Indian trader runs into.
Periodic call auctions for illiquid stocks. Under SEBI's master circular for stock exchanges, a stock whose average daily turnover is below ₹2 lakh over two quarters, and which meets the other tests in the circular, trades only through one-hour call auctions instead of continuous trading. Orders are collected for 45 minutes and matched at a single price. If you own such a stock, you can only sell during those auction windows.

A label like BE, ASM or call auction on a quote screen is a reason to slow down. Liquidity in these stocks can vanish completely.

How to trade thinly traded stocks more safely

Always use limit orders. Never send a market order into a thin book. NSE's market price protection limits how far a market order can run, but 3% is still a lot.
Price your limit inside the spread if you are not in a hurry. Bid ₹59.20, ask ₹60.10: a buy limit at ₹59.60 might fill if a seller comes along, and costs you nothing if it does not.
Size for the exit, not the entry. Ask how long it would take to sell your whole position on a bad day without crashing the price.
Split large orders across time instead of taking all the depth at once.
Avoid the first minutes after 9:15 in thin stocks, when spreads are often widest.
Be suspicious of sudden volume in a stock that normally trades little, especially after tips on social media. Thin stocks are the favourite target of pump-and-dump schemes. See Scams and red flags.

Try it

Open the market depth for one Nifty 50 company and one small company you have never heard of. For each, write down the best bid, best ask, spread in rupees and spread %.
Add up the quantity in the top five ask levels for each. How many shares could you buy before the price moved five ticks?
Pick an order size, say ₹25,000, and work out by hand what average price a market buy would get in each book, as in the worked examples.
On NSE's website, look up the series of each stock (EQ, BE or another). If one is not EQ, find out why from the exchange's circulars.
Do the same check at 9:20 am and at 2:00 pm on another day and compare the spreads.

Check yourself

Bid ₹149.90, ask ₹150.10. What are the spread and spread %? Answer: 20 paise, about 0.13% of the ₹150.00 midpoint.
The best ask has 300 shares at ₹410.00 and the next level has 500 at ₹410.20. What is the average price of a market buy for 600 shares? Answer: (300 x ₹410.00 + 300 x ₹410.20) / 600 = ₹410.10.
What does NSE's impact cost measure? Answer: The percentage mark-up over the midpoint of the best bid and offer that you pay when executing an order of a given size.
A stock is locked at its lower circuit with a huge sell queue and few buyers. Will your sell stop-loss protect you? Answer: No. Orders below the band are rejected, and your sell joins the queue at the limit price. It fills only if buyers appear.
What does series BE on NSE tell you? Answer: The stock is in the trade-for-trade segment: each trade settles by delivery, so you cannot buy and sell it intraday.

💧 Bid, ask, market depth and liquidity