What It Means
A circuit limit is the maximum percentage a stock or index is allowed to move up or down in a session before the exchange automatically pauses trading in it. The upper circuit is the maximum allowed rise; the lower circuit is the maximum allowed fall.
How It Works
Exchanges set circuit limits — commonly 5%, 10%, or 20% depending on the stock's volatility band and market cap — to slow down panic buying or selling and give the market time to absorb news. When a stock hits its circuit, trading in it freezes at that price; if it's an upper circuit, you'll see buy orders piling up with no sellers willing to trade, and the reverse for a lower circuit. Index-wide circuit breakers (like a 10%, 15%, or 20% move in Nifty or Sensex) work similarly but pause the entire market, not just one stock.
Warning
A stock stuck at its upper circuit can look "unsellable" — buy orders can't be matched to a seller until the price is allowed to move further or a seller finally shows up, so don't assume you can exit whenever you want.