Bulk Deals vs. Block Deals in the Share Market

Apart from regular trading of equity shares, the stock market regularly witnesses certain special transactions from time to time. Among these special categories of transactions are bulk deals and block deals. 

Although the two terms are regularly used interchangeably, bulk deals and block deals represent two completely different activities. As a stock market participant, you must be aware of what they mean and the differences between them. Continue reading to find out all about these transactions.       

What are Bulk Deals in the Stock Market? 

Bulk deals are a special type of trade that involves a significant quantity of shares being bought or sold on the stock exchange in a single transaction. In the context of the Indian stock market, all transactions where 0.5% or more of the total listed shares of a company are bought and sold are categorised as bulk deals. 

Generally, bulk deals are executed by large-scale investors, such as institutional investors, mutual funds, foreign portfolio investors (FPIs), and high-net-worth individuals (HNIs). These investors often use these deals to accumulate or offload moderately large positions in a particular stock. 

Key Things You Need to Know About Bulk Deals 

Now that you are aware of what bulk deals are, let us look at some key things you need to know about this particular transaction. 

• Bulk deals are carried out during regular trading hours and are visible to all investors on the price and volume charts. 
• Since bulk deals happen during regular trading hours, they could potentially impact the price of the stock. 
• Stockbrokers who facilitate bulk deals for investors are mandatorily required to notify the relevant stock exchange of the identities of the parties involved and the number of shares being exchanged.
• All bulk deals must be settled physically with the delivery of the requisite number of shares.     

What are Block Deals in the Stock Market? 

Block deals also involve the trade of a large number of shares via a single transaction. However, what sets them apart is the fact that they are much larger compared to bulk deals. In the context of the Indian stock market, if the number of shares traded is 5 lakhs or more or if the total value of the trade exceeds Rs. 10 crore, the transaction is termed a block deal.  

Block deals are conducted off the stock exchange through private negotiations between the buyer and the seller. Since the transaction occurs outside the regular trading hours, large-scale institutional investors leverage it to buy or sell significant stakes in a company without impacting its share price. 

Key Things You Need to Know About Block Deals 

With the meaning of block deals out of the way, let us look at some of the key things you need to know about this particular type of transaction. 

• Block deals are not visible to retail investors and do not appear in price and volume charts as they are not transacted during regular trading hours. 
• Block deals must be transacted only during the specified block deal trading windows. There are two 15-minute block trading windows in the Indian stock market: one in the morning and one in the afternoon. The morning window is from 8.45 AM to 9.00 AM, whereas the afternoon window is from 2.05 PM to 2.20 PM.
• Every block deal must be priced according to the block reference price applicable to a stock. Investors are free to quote a price up to 1% more or less than the block reference price.
• The block reference price for a stock varies depending on the block trading window. In the case of the morning window, the reference price is usually the previous day’s closing price. In the case of the afternoon window, the reference price is usually the Volume-Weighted Average Price (VWAP) of the stock from 1.45 PM to 2.00 PM.        

Bulk Deals and Block Deals: The Key Differences 

Both bulk and block deals have certain key differences that set them apart from one another. Understanding the factors distinguishing the transactions is key to making informed decisions.

Conclusion

Bulk deals and block deals are two special transactions that take place periodically. As an investor, being aware of when these transactions are conducted can give you insights into the potential future price movements of shares. For example, a promoter selling a major portion of their stake via a block deal could potentially indicate trouble within the company, leading to a fall in the share price. 

Therefore, if you are planning to invest in a stock, it is advisable to first check the details of the various block and bulk deals on the NSE and BSE before making a decision. This will allow you to make well-informed investment decisions. In addition to finding out about bulk and block deals on the NSE and the BSE, you can also get the necessary information from the Research 360 platform of Motilal Oswal. You can also get the latest fundamental and technical information and the latest news and announcements for any particular stock of your choice on the platform. Sign up for Research 360 today and get access to all of these features and more.