Quora Answer: When the Stock Hits Lower Circuit, is it a Wise Decision to Start Accumulating It for the Long Run?

The following is my answer to a Quora question: “When the stock hits lower circuit, will it be a wise decision to start accumulating it for long run?”

Stocks hit lower circuit for a reason.  Unless you know what that reason is, and understand how the situation will play out, it is never a good idea to buy them.  If you believe that this lower circuit is due to inclement news that you feel to be false, or misleading, and the market has overreacted, this would be a good time for bargain hunting.  But if that news is due to fund underperformance, management issues, or consecutive losses, and there seems little scope for there to be an improvement, this is a stock to stay away from.  It may mean there could be a leveraged buyout, bankruptcy application or delisting.  Sometimes, it is preferable to wait and see, exercising caution.  When even large funds, with entire departments of analysts are staying away, chances are, you should, as well.