The rules every Indian trader runs into

🎯 In 30 seconds: Indian exchanges put guard rails on prices. Most stocks have a daily price band of 2%, 5%, 10% or 20%, and a stock that reaches the edge is "in the upper (or lower) circuit". Stocks with unusual price or volume behaviour are moved into surveillance frameworks (ASM, GSM) with higher margins, tighter bands and trade-for-trade settlement. A stock's derivatives go into a ban period when open interest passes 95% of its market-wide limit. If the Nifty 50 or Sensex falls 10%, 15% or 20% in a day, the whole market halts. If you work at a listed company, insider trading rules decide when you may trade its shares at all. Knowing these rules before they hit you saves money.

Lanes, signals and speed limits

Driving in an Indian city, you can ignore a lot. You cannot ignore a red light at a junction with a traffic constable, a one-way sign, or a speed breaker you did not see at night. The market works the same way. Most days the rules are invisible. On the day a stock jumps 20% or the whole market falls 10%, they decide whether your order fills, at what price, and whether you can get out at all.

Price bands and circuits

NSE and BSE set a price band for each stock: the furthest the price may move in a day from the previous close. NSE's current bands are 2%, 5% and 10% either way for different groups of stocks, and 20% for many others. The exchanges move stocks between bands regularly, often several times a year, so a stock's band can change.

Worked example (hypothetical). Sharma Foods Ltd closed yesterday at ₹240 and is in the 5% band.

Upper band: ₹240 x 1.05	₹252
Lower band: ₹240 x 0.95	₹228

Orders priced outside ₹228 to ₹252 are rejected for the day. If buyers keep bidding at ₹252 and no one wants to sell, the stock is locked at the upper circuit: the order book shows a large buy quantity at ₹252 and nothing on the sell side. A lower circuit is the reverse, with sellers and no buyers.

A stock locked at the upper circuit. You can place a buy order, but it only fills if someone sells. Holders of a short position cannot buy back, and a stop loss to buy above ₹252 can never trigger today.

Stocks that have futures and options work differently. NSE says no fixed price band applies to them. Instead the exchange applies a dynamic price band, set at 10% of the previous close, which can be widened in steps during the day if the price keeps pressing against it. In practice that means an F&O stock can move more than 10% in a day, but not in one uninterrupted jump.

What circuits do to your stop loss

A stop loss to sell cannot fill in a stock locked at its lower circuit, because no one is buying. It may fill the next morning at a much lower price, or days later. Small, thinly traded stocks hit circuits most often. Read Stop losses with this in mind, and size positions in small stocks as if a stop might not work for several days.

Surveillance: ASM, GSM and trade-for-trade

SEBI and the exchanges watch every stock against objective criteria such as large price swings, high-low variation, concentration of trading in a few accounts, volume spikes, delivery percentage, number of unique PANs trading it, P/E and market capitalisation. Stocks that trip these criteria are moved into a surveillance framework. The exchanges say the purpose is to alert investors to be extra cautious and to do their own due diligence. Being in a framework is not a finding of wrongdoing, but it changes how the stock trades.

Additional Surveillance Measure (ASM). NSE's FAQ (version of August 2026) describes two tracks:

Long-term ASM stage	What happens
Stage I	Margin becomes 100% from T+3 day
Stage II	Price band cut to the next lower level, 100% margin
Stage III	Band cut further, 100% margin
Stage IV	Gross settlement (trade-for-trade) with 100% margin for all clients and a 5% band

Short-term ASM has two stages, with margins of at least 50% and then 100%. Stages are reviewed weekly for long-term ASM, and stocks move down one stage at a time when they stop meeting the criteria. The exchange issues notice after market hours, usually one trading day before a change takes effect.

Graded Surveillance Measure (GSM). GSM is a separate and stricter framework. Since a 2019 review by SEBI and the exchanges it has four stages. From NSE's GSM FAQ (version of June 2026):

GSM stage	Surveillance action
Stage I	100% margin and a price band of 5% or lower
Stage II	Trade-for-trade, band of 5% or lower, and buyers deposit an Additional Surveillance Deposit (ASD) of 50% of the trade value
Stage III	Trade-for-trade, band of 5% or lower, trading only once a week (Monday or the first trading day of the week), and an ASD of 100% for buyers
Stage IV	As Stage III, with no upward price movement allowed

GSM was extended to SME stocks in November 2023 and to PSU companies in September 2024. Stocks are reviewed monthly and can move back down in steps.

Trade-for-trade (T2T). In this segment every trade must be settled by delivery. You cannot buy and sell the same stock in the same day and net the two off. If you buy in the morning and sell in the afternoon, you must still pay for the shares you bought and deliver the shares you sold, which you do not yet have, so the sale becomes a short delivery (see Short selling). Intraday trading is effectively impossible in T2T stocks.

When an order is placed in one of these stocks, NSE's trading system shows an alert that the security is under a surveillance measure and asks whether to continue, and many brokers show a similar flag in their apps. Treat that as a reason to stop and look, not a box to click past.

The F&O ban period

Each stock with derivatives has a market-wide position limit (MWPL): the most open interest allowed across all traders. SEBI's circular of 29 May 2025, effective 1 October 2025, defined it as the lower of 15% of the stock's free float and 65 times its average daily delivery value in the cash market, with a floor of 10% of free float. Open interest is now measured as future equivalent open interest (FutEq OI), meaning delta-adjusted positions across futures and options together, not a simple count of contracts.

The rules around the limit:

At the end of each day the exchange checks whether FutEq OI in a stock exceeds 95% of its MWPL. If it does, the stock enters the ban period.
During the ban, any trading in that stock's derivatives must result in a reduction of your FutEq OI by the end of the day. SEBI's example: a delta position of +10 may be cut towards 0, but flipping it to -10 does not count as a reduction. A passive rise caused by price moves is not treated as a breach.
Normal trading resumes only when open interest across exchanges falls to 80% of the MWPL or below.
Since 3 November 2025 exchanges also monitor MWPL use during the day.
An individual client's position in a stock is capped at 10% of its MWPL.

Worked example (hypothetical). A stock's MWPL works out to 12 crore shares. It enters the ban if FutEq OI at the close is above 11.4 crore (95%). It leaves the ban once FutEq OI is 9.6 crore or less (80%). During the ban, a trader holding a long futures position may close or reduce it, but may not add a new position, even a hedged one that keeps the same net exposure.

The ban does not stop trading in the shares themselves. NSE publishes the list of stocks in the ban for the next day after the close, and many brokers show it in their apps.

Market-wide circuit breakers

If the whole market falls sharply, trading stops across the country. The trigger is a fall in the Nifty 50 or the Sensex, whichever reaches the level first, and the halt applies on all exchanges in equity and equity derivatives together. NSE lists the current rules:

Fall from previous close	Hit before 1:00 p.m.	Hit 1:00 p.m. to 2:30 p.m.	Hit later
10%	45-minute halt	15-minute halt	No halt at or after 2:30 p.m.
15%	1 hour 45 minute halt	45-minute halt if before 2:00 p.m.	Closed for the rest of the day at or after 2:00 p.m.
20%	Trading halts for the rest of the day, at any time

After a halt, trading restarts with a pre-open call auction session, so prices are discovered before continuous trading resumes.

Worked example. If the Nifty 50 closed yesterday at 24,000 (a round number for easy math), today's trigger levels are:

10%: 24,000 x 0.90	21,600
15%: 24,000 x 0.85	20,400
20%: 24,000 x 0.80	19,200

A hypothetical day. The index falls 10% before 1:00 p.m., trading stops for 45 minutes, then reopens through a call auction. A further fall to the 15% level would trigger the next halt.

These halts are rare. They exist to give everyone time to absorb news during a panic, not to stop prices falling. When trading resumes, prices can keep falling. For India's past crashes, see Bubbles, scams and crashes.

Know what happens to your orders in a halt

Read your broker's help page on market halts once, before you need it: which open orders are kept, which are cancelled, and how stop orders behave at the reopening auction. A stop that triggers at the reopen fills at the price the auction finds, which can be far from your stop.

Listing day and relisted shares: the call auction

On the day an IPO lists, or a suspended stock is relisted, the opening price is found in a special pre-open call auction. Under SEBI's circular of June 2024 the call auction for IPO and relisted shares runs from 9:00 a.m. to 10:00 a.m., and normal continuous trading starts at 10:00 a.m. Orders are collected, matched at a single price that clears the most quantity, and only then does normal trading begin. SEBI lengthened the window partly because many orders at inflated prices were being cancelled just before the auction closed. If you see a "listing gain" number at 10:00 a.m., that is where it came from. See IPOs and listings.

If you work at a listed company: insider trading rules

Trading on unpublished price sensitive information (UPSI), such as results before they are announced or a deal that has not been disclosed, is illegal for anyone, under SEBI's Prohibition of Insider Trading (PIT) Regulations. If you work at a listed company, or at a firm that advises one, extra rules apply to you as a "designated person":

Trading window. The company closes the trading window for designated persons and their immediate relatives from the end of every quarter until 48 hours after the results are announced. For the quarter ending 30 September, the closure starts on 1 October.
Pre-clearance. Even when the window is open, trades above the company's threshold need approval from the compliance officer. Approval given while the window was open becomes invalid once it closes.
Contra trades. After buying or selling, you may not do the opposite trade within the next six months.
Disclosures. Trades by designated persons above set limits have to be reported to the company, which reports them to the exchanges.

Your employer's code of conduct is the document that applies to you. Read it before buying even one share of your own company, and ask compliance if anything is unclear.

Other rules you will meet

Settlement. Cash market trades settle on T+1. See Market hours and settlement.
Upfront margin and peak margin. Your broker must collect margin before a trade and through the day. See Margin.
Short selling. No naked shorts, and intraday shorts must be covered the same day. See Short selling.
Auto square-off. Your broker closes intraday positions before the close at a time it sets. See Intraday trading.
Order price checks. Exchanges reject orders too far from the current price, and brokers add their own limits. See Order types.

Try it

On NSE's website, open the price band page and the latest ASM and GSM lists. Pick three stocks from your watchlist and note each one's band and whether it carries any surveillance flag.
Find today's list of stocks in the F&O ban period. For one of them, look at how its share price moved over the last two weeks.
Take yesterday's close of the Nifty 50 and the Sensex and work out today's 10%, 15% and 20% circuit breaker levels for each.
If you work at a listed company, find your employer's insider trading code and note when the next trading window closes.

Check yourself

A stock in the 10% band closed yesterday at ₹1,000. What is today's allowed range? Answer: ₹900 to ₹1,100. Orders outside that range are rejected.
Why can you not trade intraday in a trade-for-trade stock? Answer: Every trade there must be settled by delivery, so a buy and a sell on the same day do not net off. Selling shares you do not yet hold becomes a short delivery.
When does a stock enter the F&O ban, and when does it come out? Answer: It enters when future equivalent open interest at the close exceeds 95% of its MWPL. Normal trading resumes when open interest falls to 80% of the MWPL or below.
The Nifty 50 falls 10% at 11:30 a.m. What happens? Answer: A market-wide halt of 45 minutes across equity and equity derivatives, followed by a pre-open call auction before trading resumes.
You work at a listed company and the quarter ended on 31 December. When can you next trade its shares? Answer: Not until 48 hours after the results for that quarter are announced, and then subject to pre-clearance and the six-month contra trade rule in your company's code.

🚦 The rules every Indian trader runs into