Recently, the stock market in Nepal has been dropping sharply almost every day. Because of this, the term “circuit breaker” has become very common. Many new investors, however, do not fully understand what it means or when it is triggered.
A circuit breaker is a rule used by the Nepal Stock Exchange (NEPSE) to control large price swings in company shares and the overall market. If a company’s share price rises or falls more than 10% compared to the previous day’s closing price, the trading of that share cannot go further beyond that limit. It can only move within this 10% range. NEPSE introduced this rule on 10 Ashoj 2063 (B.S.).
To control abnormal changes in the overall stock market, NEPSE began using a market-wide circuit breaker on 6 Ashoj 2064 (B.S.). Initially, the pauses were based on points, but starting from 9 Bhadra 2065 (B.S.), NEPSE applied them based on percentage changes.
The idea comes from global markets, like the U.S., which started using them after Black Monday in 1987, when the Dow Jones dropped 22% in a single day. Circuit breakers help avoid panic selling or sudden price spikes.
How NEPSE Circuit Breakers Work
First hour of trading (before 12 PM): If the NEPSE index moves 4% up or down, trading pauses for 20 minutes.
Second hour of trading (before 1 PM): If the index moves 5%, trading stops for 40 minutes.
After that: If the index changes 6% or more, trading halts for the rest of the day.
These pauses give investors time to check news, announcements, and market events before making decisions.
| Trading Time | Index Fluctuation | Action |
|---|---|---|
| First hour (before 12 PM) | ±4% | Trading halted for 20 minutes |
| Second hour (before 1 PM) | ±5% | Trading halted for 40 minutes |
| Later in the day | ±6% | Trading halted for the rest of the day |
Circuit for Individual Stocks
Each individual stock also has a limit. Its price can only increase or decrease 10% in a single day. If it reaches this limit, it cannot move further, but trading continues normally.
Unlike the NEPSE index, if a single stock hits this limit, trading continues, but the price cannot rise or fall further that day.
| Stock Price Movement | Circuit Type | Action |
|---|---|---|
| +10% | Positive Circuit | Price cannot rise further; trading continues |
| -10% | Negative Circuit | Price cannot fall further; trading continues |
History of Nepal Stock Circuit Breakers
| Date | NEPSE Index | % Change |
| Sep 18, 2025 | 2,511.91 | -6.00% |
| Jul 28, 2024 | 2,670.82 | 3.99% |
| Mar 4, 2024 | 2,078.00 | 6% |
| Dec 10, 2023 | 1,963.98 | 6% |
| Dec 14, 2021 | 2,418.85 | 6.01% |
| Jul 19, 2020 | 1,479.03 | 6.04% |
| Jul 1, 2020 | 1,336.52 | 6.01% |
| Jun 30, 2020 | 1,260.75 | 6.06% |
Circuit breakers give investors time to check announcements, news, and market events before making decisions. They act like a safety net, keeping the stock market more stable during sharp movements.
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