What are Upper Circuit Stocks and How to Invest in them for Diversified Portfolio?

Have you heard about the buzz surrounding upper circuit stocks NSE in the stock market? 

These high-flying stocks have taken the market by storm, capturing the attention of investors everywhere with their potential for significant gains and exciting trading opportunities. 

But before you jump in, it’s important to understand the ins and outs of these upper circuit shares. In this comprehensive guide, we’ll take a deep dive into the world of upper circuit stocks, exploring what they are, how they work, and the strategies you can use to make the most of them.

What are Upper Circuit Stocks NSE?

Upper circuit stocks are stocks that have hit their upper circuit limit. This means their price has risen to the maximum percentage allowed by the stock exchange for that particular trading day.

List of Top Upper Circuit Stocks NSE

Check out the upper circuit stocks list below:

How is the Upper Circuit Limit Determined?

Trading in shares with the upper circuit works differently. This limit is set by the exchange and varies from stock to stock. Once a stock hits its upper circuit limit, trading in that stock is suspended for a certain period. Typically between 15-45 minutes. 

This is done to prevent excessive speculation and price manipulation. Furthermore, it allows the market to cool down and for traders and investors to analyze the situation before resuming trading. During the suspension, buyers can place orders to buy the stock. However, the sellers cannot place orders to sell until trading resumes. 

Once trading resumes, the stock may continue to trade at its upper circuit stocks price or may fall below that price.

Best Upper Circuit Stocks in India 2023

Investing in the best upper circuit stocks in India 2023 opens the door to potential investment opportunities. Therefore, some of the best upper circuit NSE stocks have been mentioned below. 

1. Metal Coating (India) Ltd

A renowned player in the metal industry, specializing in high-quality metal coating solutions. Their expertise lies in providing corrosion-resistant coatings for various applications, making them a trusted name in the sector.

• High Risk: Stock is 4.21x as volatile as Nifty
• Smallcap: With a market cap of ₹68 cr, the stock is ranked 2,639

2. Maan Aluminium Ltd

A leading manufacturer and supplier of aluminum extrusions and related products. With a focus on innovation and quality, they cater to diverse industries, offering customized aluminum solutions to meet specific customer needs.

• High Risk: Stock is 7.14x as volatile as Nifty’
• Smallcap: With a market cap of ₹489 cr, the stock is ranked 1,489

3. Kiduja India Ltd

A dynamic company engaged in the business of pharmaceuticals and healthcare products. They are dedicated to delivering high-quality and affordable healthcare solutions to improve the well-being of people, making them a valuable player in the healthcare sector.

• High Risk: Stock is 6.97x as volatile as Nifty
• Smallcap: With a market cap of ₹12 cr, the stock is ranked 3,660

How to Invest in Upper Circuit Stocks BSE?

Investing in upper circuit stocks today offers an interesting opportunity, but it’s essential to explore different avenues wisely. First and foremost, stock markets are the primary platform where these stocks are traded, so you can invest through a brokerage account. Keep an eye on news and trading platforms to stay updated on upper circuit stocks. Another way is through mutual funds or exchange-traded funds (ETFs) that focus on specific market segments or themes, including those related to these stocks.

Factors That Can Trigger Upper Circuit in Stock Market

Several factors can trigger upper circuits stocks in the stock market. Here are a few:

• Positive News and Announcements: Positive news about a company, such as a new product launch, expansion plans, or a significant order win, can trigger an upper circuit in its stock price. For example, if a company announces a major merger or acquisition, it can make its stocks hit upper circuit as investors rush to buy shares in the company. 

• Strong Financial Results: When a company reports better-than-expected financial results, it can increase buying interest from investors, leading to an upper circuit in its stock price.

• Positive Market Sentiment: A positive market mood index (MMI), driven by political stability, economic growth, or global market trends, can lead to an upper circuit in stock prices across the market.

Factors to Consider While Investing in Upper Circuit Stocks

Though investing in upper circuit stocks can potentially lead to high returns, it is important to consider the following factors:

• Lack of Liquidity: Upper circuit stocks can have low trading volumes, which can make it difficult to buy or sell shares when you need to. This can result in higher bid-ask spreads, which might impact your returns.

• Limited Price Discovery: The upper circuit limit can artificially inflate the stock price, making it difficult to determine its fair value. This can lead to increased volatility in the stock price when trading resumes.

• Risk of Price Manipulation: The limited price discovery and lack of liquidity can make upper circuit shares vulnerable to price manipulation by unscrupulous traders. This can result in sudden and sharp price movements, impacting your returns.

• Potential Downsides: Investing in upper circuit stocks can yield high returns. However, it is important to note that there are potential downsides, such as a sudden drop in the stock price when trading resumes or a lack of fundamentals to support the price increase.

Benefits of Investing in Upper Circuit Stocks NSE

Investing in upper circuit stocks can offer potential benefits, but it’s essential to understand the associated risks and exercise caution. Here are some potential advantages:

• High Growth Potential: Upper circuit stocks have typically shown strong upward momentum, attracting investors seeking substantial returns within a short period.

• Market Sentiment: These stocks often garner attention due to positive news, market sentiment, or favorable developments, which can drive further price increases.

• Liquidity: During the trading halt caused by an upper circuit, investors have time to assess their positions and make informed decisions. This can help prevent hasty or impulsive trading.

Strategies to Use Upper Circuit Or Price Bands to Your Advantage

Here are some strategies you can use for investing in upper circuit stocks to your advantage: 

1. Understand Market Trends and Sentiments

Keep an eye on the overall market trends and sentiments, as these can impact upper circuit stocks. Look for sectors that are performing well or have positive news. As these can be good places to start your research.

2. Plan Your Entry and Exit Points

If you plan to invest in a particular stock, it is a good idea to check its upper circuit stocks and lower circuit stock limits. You can use these limits to determine the stock’s entry and exit points. 

3. Conduct Thorough Research

Before investing in an upper circuit stock, conduct thorough research on the company, its financials, and its future growth prospects. Look for strong fundamentals and positive news supporting the stock price increase.

4. Be Aware of Trading Patterns and Volume

Closely monitor trading patterns and volume for upper circuit & lower circuit stocks. High trading volumes can be a positive sign and indicate a lack of liquidity.

5. Manage Your Risk

Circuits or price bands can help you manage your risk. If you have invested in a stock that has hit its circuit limit, you can be sure that the price will not move beyond a specific range in a single trading session. This can help you limit your losses and manage your risk effectively.

6. Set Realistic Profit Targets and Minimize Losses

Determine your entry and exit points for upper circuit stocks, and set realistic profit targets based on your research. 

7. Avoid Sudden Price Movements

Circuits or price bands can help you avoid sudden price movements in a stock. If a stock has hit its circuit limit, trading in that stock will be suspended for some time. During this period, you can analyze the situation and make informed decisions without being influenced by sudden price movements.

To Wrap It Up…

Investing in upper circuit stocks can be a potentially rewarding but risky venture. Hence, to avoid the potential downsides and use circuits or price bands to your advantage, it is important to conduct thorough research and follow all the strategies that we have shared above.  Moreover, to make investing easier, you can consider using smallcase. It is a platform that provides pre-built portfolios of stocks that align with different investment themes and strategies.

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