Impact Cost
The cost, expressed as a percentage, of executing a stated order size against the current order book relative to the mid price.
Formula
Impact Cost % = (Actual Execution Price - Ideal Mid Price) / Ideal Mid Price x 100
Unit
%
In depth
Impact cost is the formal, measurable version of liquidity, and Indian exchanges publish it for index-eligible securities at a standard order size. It rises with order size and falls with depth, which is why the same stock has a low impact cost for a retail order and a punishing one for an institutional block. Because it is computed from the book rather than from realised trades, it is a forward-looking estimate of what an exit would cost. Index inclusion rules in India use it explicitly, so a stock with high impact cost cannot enter the Nifty regardless of its market capitalisation.
Worked example
Mid price ₹250.00 and a ₹10 lakh order fills at an average of ₹250.75. Impact cost = 0.75 / 250 x 100 = 0.30%. A round trip costs about 0.60% before any brokerage or tax.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Impact Cost” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.