Delta Corp and Upper Circuit

Delta Corp Limit is the flagship company of the group and it has an workforce 2000+ employees, and flaunts 250,000+ shareholders, society and customers across the country.The company reported consolidated net revenue of over INR 800+ Cr, and EBITDA (earnings before interest, taxes, depreciation, and amortisation) of INR 300+ Cr. in Fiscal Year 2020.Consolidated net revenue indicates to the sum of the net income of a parent company excluding any income from subsidiaries recognised in its individual financial statements and the net income of its subsidiaries determined after excluding unrealised gain in inventories, income from intra-group transactions, etc. Meanwhile, EBITDA is a tool to measure the financial health of a brand, and it acts as an alternative method to the net income. It is a measure of profitability.

Delta Corp has performed well over the time as they significantly reduced their losses: they recorded a loss of Rs. 22 crore in the second quarter of the FY22 while they had previously recorded a loss of Rs. 55 crore in the second quarter of the FY21. Due to their healthy and improving financial performance, the stockof Delta Corp had increased in value and was expected to hit the upper limit.

Since we are discussing the chances of the Delta Corp hitting the upper limit, it is essential to understand what circuit limits actually are.Circuit limits are actually associated with circuit breakers.

The stock market is a volatile market. The price of the stocks are always moving in different directions, and this price movement is a key factor which determines whether an investor is going to secure profits or is going to suffer losses.If and when the value of stock decreases or increasesby a large amount, it comes as a shock to investors who may not have been prepared for this kind of movement. This is why, the stock exchanges set a safeguard in order to restrict the price movements of a stock within a certain limit and to prevent large price movements in the stock market in a relatively short period of time. This safeguard is termed as circuit limit or price band. In India, the circuit limits for Indian stock markets are determined by SEBI (Securities and Exchanges Board of India).

The circuit limit of a stock determines the price range within which that particular stock can be traded within that trading day. The circuit limit is determined based on various factors which include liquidity, volume, and the category of the stocks. This limit is represented by a percentage, which can vary from anywhere between 2% to 20%. The highest price which a stock can reach in a particular trading day, is called the upper circuit limit, or simply the upper limit. Similarly, the lowest price which a stock can reach in a particular trading day, is called the lower circuit limit, or simply the lower limit.

When the price of a stock reaches the specific upper limit or lower limit which were set by the stock exchange, any order for that stock remains pending at that limit price. When a stock hits the upper limit, the orders remain pending and there remains only buyers for that stock, and no sellers. Contrary to this, when a stock hits the lower limit, the orders remain pending and there remains only sellers for that stock, and no buyers.

An example of a stock hitting the upper limit is when the Delta Corp stock hit its upper limit on. An example of a stock hitting the lower limit is when several of Adani group stocks hit their respective lower limits in June, 2021.

The circuit limits are not a stock-specific system, but are also applied to market indices. The circuit breaker system is applied at three different movements of an index: when the movement is by 10%, 15%, or 20%. When the index sees this kind of movement, trading is halted in both the stock markets and the derivatives markets. This halt can vary from anywhere between a few minutes to the remainder of that particular trading day. The duration of this trading halt is also determined by the time at which the index moves. For example, a 10% rise or fall before 1:00 pm sees a trading halt for 45 minutes, while the same 10% rise or fall between 1:00 pm and 2:30 pm activates a 15-minute halt.

• A 10% movement before 1:00 pm triggers a 45-minute halt, between 1:00 pm and 2:30 pm triggers a 15-minute halt and after 2:30 pm triggers no halt.
• A 15% movement before 1:00 pm triggers a halt of 1 hour 45 minutes, between 1:00 pm and 2:30 pm triggers a 45-minute halt and after 2:00 pm triggers a halt for the remainder of the trading day.
• A 20% movement at any time of the trading day, activates a halt for remainder of that particular trading day.

The various details of a stock, including the upper limit and the lower limit of the stock, can be found on the stock exchanges ie. BSE and NSE. Investors can find these details on the websites.

The circuit limits of any stock are set by the exchanges to provide security to the investors. The equity markets have risks associated with them and it is important to identify the risks before you make a decision. For more investment related information and knowledge visit Nirmal bang.