Key Differences Between Block Deals and Bulk Deals in the Stock Market
The stock market is a dynamic platform where shares are bought and sold by various participants. In addition to retail investors, there are large institutional investors such as investment banks, mutual funds, hedge funds, pension funds, foreign institutional investors (FIIs), high-net-worth individuals (HNIs), and company promoters. These institutional investors and HNIs have significant financial resources and in-depth market knowledge, often leading them to engage in different trading patterns compared to retail investors. Two common types of large-scale transactions are block deals and bulk deals.
What is a Block Deal?
A block deal is a single trade where either the number of shares traded exceeds 5,00,000 or the transaction value is more than Rs. 10 crores. The Securities and Exchange Board of India (SEBI) has set a minimum value of Rs. 10 crores for block deals. These transactions take place in a designated block deal window, which ensures that they are not visible to retail investors and do not reflect on the volume charts of trading platforms.
Rules Governing Block Deals:
- Special Trading Window: Block deals must be executed only in the block deal window, which operates in two sessions:
- Morning Window: 8:45 AM to 9:00 AM
- Afternoon Window: 2:05 PM to 2:20 PM
- Block Reference Price: Orders for block deals must be placed within ±1% of the Block Reference Price:
- Morning Window: The reference price is the previous day’s closing price.
- Afternoon Window: The reference price is the volume-weighted average price (VWAP) of the stock between 1:45 PM and 2:00 PM.
- Unmatched Orders: If a block deal order remains unmatched in a session, it is canceled and not carried forward to the next trading window.
What is a Bulk Deal?
A bulk deal occurs when a transaction involves at least 0.5% of the total listed shares of a company. Unlike block deals, bulk deals take place during regular trading hours and are visible to all market participants. They appear on trading platforms’ volume charts and impact stock prices in real time.
The broker executing the bulk deal must report it to the stock exchanges with details of the transaction, including the number of shares traded and the parties involved. Interestingly, if a bulk deal also meets the criteria for a block deal (i.e., exceeding Rs. 10 crores in value), the involved parties can choose to execute it either as a block deal or during normal market hours as a bulk deal.
Impact of Block and Bulk Deals on Stock Prices:
Both block and bulk deals can signal market interest in a particular stock. However, these signals should be carefully analyzed in conjunction with other market indicators. A single bulk or block trade does not necessarily indicate a directional movement in the stock price. However, repeated large transactions in the same direction (buy or sell) may suggest a trend in investor sentiment toward that stock.
Key Differences Between Block Deals and Bulk Deals:
Conclusion:
Block deals and bulk deals are key mechanisms through which large investors execute high-value transactions in the stock market. While block deals provide privacy by being executed in a separate window, bulk deals are visible to all traders and impact market prices in real time. Investors can use data on these trades as part of their trading strategy, but it is crucial to analyze them alongside other market indicators to make informed investment decisions.
Disclaimer: This blog is for educational purposes only and should not be considered financial advice. Always consult a financial expert before making investment decisions.
