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The stock market is accessible to various groups of people today. From retail investors to High Networth Individuals (HNIs) to institutional investors, the stock market has seen all kinds of people participating in trading and investing activities.
The term HNI indicates that these individuals have a high income. This typically means their investment values are high, too.
Such massive investments come under the concepts of block and bulk deals.
What is a block deal?
A block deal is a single trade involving more than 5,00,000 shares or having a trade value of more than ₹10 crores. These are high-value deals on the stock exchange occurring in specific time slots during the day.
Since these deals usually involve large investors, the details are unavailable to the public.
Features of block deals:
- Trades are of high value. They satisfy either of the two conditions regarding the quantity of shares or the value of the trade.
- The trades occur during specific time slots called block deal windows.
- BSE window: 35 minutes from 9:15 a.m. to 9:50 a.m.
- NSE window: 2 sessions – 8:45 a.m. to 9:00 a.m. and 2:05 p.m. to 2:20 p.m.
- There is no transparency regarding block deals. These trades are not published on the regular sections of the stock exchange.
- Block deals that fail to execute within the block deal window get cancelled. Traders must book fresh trades in the next window.
- Block reference price – Determines the share prices in block deals.
- Morning slot: Previous day’s closing price or the previous day’s closing price +/- 1% to adjust for any changes that may have happened.
- Afternoon slot: Volume-weighted average of the market price of shares from 1:45 p.m. to 2 p.m.
What is a bulk deal?
Bulk deals are deals by a single trader involving a minimum of 0.5% of the total number of shares listed by a company. Bulk deals are mostly entered into by institutional investors like mutual funds.
The execution of bulk deals can happen through a single transaction or multiple transactions, but it has to involve a single trader.
Features of bulk deals:
- The shares involved should be equal to or more than 0.5% of the total number of shares listed by the company on one stock exchange.
- Bulk deals occur during usual trading hours and do not have any separate trading window.
- If a bulk deal qualifies the criteria of a block deal, too, it can be traded in the block deal window.
- The bulk deal transactions happen on regular platforms and are visible to the public.
- The broker facilitating the execution of bulk deals must ensure that all bulk deals are reported to the stock exchange on a daily basis. The disclosure of all the details to the stock exchange must happen immediately after execution.
- Bulk deals cannot be squared off, i.e., there cannot be a reversal. A bulk deal has to end with delivering shares to the buyer.
Impact on the stock market
Block and bulk deals do not lead to definite price movements in the market. They may give slight indications of how the market is trending. Investors usually keep a close watch on these deals, because shares traded under block and bulk deals are considered credible.
However, retail investors must be mindful and consider other indicators to determine market trends rather than relying only on block and bulk deals.
There are some cases where block deals can trigger price movements in the market.
A recent case of a block deal involving Zomato’s shares showed a price increase of 5%.
Let us look at some examples to see if they classify as block or bulk deals.
Trade 650,000 shares of ABC Ltd at ₹20 each.
Trade value = 650000 * 20 = ₹ 13,000,000
The trade value is less than ₹ 10 crores, but the number of shares is more than 500,000.
Hence, this is a block deal.
ABC Ltd has listed 100,000 shares on the stock exchange at ₹ 10 per share.
Trader A wants to buy 1000 shares.
Trade value = 100,000 * 100 = ₹ 10,000,000
This is not a block deal since the number of shares is less than 500,000 and the trade value is less than ₹ 10 crores.
However, A is buying 1% of the total shares listed. Hence, this is a bulk deal.
Block deals and bulk deals generally involve large amounts of investments. From the perspective of retail investors, these details suggest how few stocks are trending in the market.
But, this should not be the primary source for making investment decisions. Investors must use their discretion after analysing the market using other indicators.
Block deals involve 5,00,000 shares or more, or have a trade value of ₹10 crores and more. They are executed only during the block deal window and the details are not available to the public.
Bulk deals, on the other hand, involve 0.5% of the total listed value. It trades through the day and is available for public view.
Yes, block deals impact share prices, considering the huge number of shares involved. When block deals involve buying shares, it impacts shares positively. On the other hand, when block deals sell shares, they affect prices negatively.
XYZ Ltd has listed 1,000,000 shares on the exchange at ₹ 1000 per share.
Trader A wants to buy 500,000 shares.
Trader A = 50% of total shares listed.
Trade value = 500000 * 1000 = ₹ 500,000,000
Since the trade value is above ₹10crores and the number of shares is more than 0.5% of total shares, it is both a block and bulk deal.
Bulk deals do not require any special slot for trading. They trade similarly to regular trades during the normal time of the exchange, between 9.15 AM to 3.30 PM.
The details of block and bulk deals are published by the end of the day on the official websites of the National Stock Exchange and Bombay Stock Exchange.