Last Updated on September 27, 2023 by BFSLTeam BFSLTeam
Table of Content
Introduction
The stock market has different types of investors who trade in different ways. Some investors are small and regular, who buy and sell a few shares at a time. These are called retail investors. Some investors are big and powerful, who buy and sell a large number of shares at a time. These are called institutional investors. They include promoters, rich people, and big companies like mutual funds, banks, hedge funds, insurance companies, etc.
These institutional investors have a lot of money and information that can affect the stock market. When they trade in huge volumes, they choose between block deals and bulk deals. These are two special types of trades that have different rules and timings. If you want to be a serious investor, you need to know the difference between block deals and bulk deals.
- Block Deal
A block deal is a trade where more than or equal to 5 lakh shares are bought or sold in one transaction. The value of the trade should be at least Rs.10 crore. Before 2017, the minimum value was Rs.5 crore, but SEBI (Securities and Exchange Board of India) increased it to Rs.10 crore.
Block deals are not done in the normal trading hours for retail investors, which are from 9:15 AM to 3:30 PM. Block deals are done in special trading windows called block deal windows. Retail investors cannot see block deals; they do not show up on the price chart. In India, there are two block deal windows, one in the morning and one in the afternoon, for 15 minutes each.
- The morning block deal window is from 8:45 AM to 9:00 AM.
- The afternoon block deal window is from 2:05 PM to 2:20 PM.
Block deals also have a special price rule called the Block Reference Price. This is the price that is used to decide whether a trade is a block deal or not. Institutional investors can place orders with a 1% (+ or -) difference from the Block Reference Price. The Block Reference Price changes for both trading windows. For the morning window, it is the closing price of the previous trading day. For the afternoon window, it is the average price of the stock between 1:45 PM and 2:00 PM.
Finally, it is important to note that block deal orders that are not matched or executed are cancelled and not carried forward to the next trading session. This means that if a block deal order is placed in the morning window and is not done, then it is cancelled. It is not moved to the afternoon window at 2:05 PM.
- Bulk Deal
A bulk deal is a trade where at least 0.5% of the total shares of a company are bought or sold in one transaction. Bulk deals are different from block deals in many ways. Some of the differences are:
- Bulk deals can be done anytime during the normal trading hours, which are from 9:15 AM to 3:30 PM. Block deals can only be done in special trading windows, which are from 8:45 AM to 9:00 AM and from 2:05 PM to 2:20 PM.
- Bulk deals are visible to everyone in the market, including retail investors. They can see the volume traded in a bulk deal on the price chart on trading platforms and websites. Block deals are not visible to retail investors. They do not show up on the price chart.
- Bulk deals have an immediate impact on the market prices, because they involve a large number of shares. The broker who does bulk deals between investors or institutions has to tell the stock exchanges about the details of the trade. This includes who are the buyers and sellers, how many shares they traded, and at what price they traded.
- Bulk deals can also be done in the block deal windows, if the value of the 0.5% of shares traded is more than Rs. 10 crores. In that case, the investor who does the trade can choose to do it during the normal trading hours or during the block deal windows. Investors who want to keep their names secret during trading hours may choose to do it during the block deal windows.
The Impact of Block Deals vs Bulk Deals on Stock Price
Bulk and block deals are two types of large transactions that take place in the stock market. They involve institutional investors such as mutual funds and hedge funds, who often have access to important information about the company’s performance and prospects. These deals can affect the stock price in different ways, depending on how they are executed and reported.
Bulk deals are transactions that occur during the normal trading hours of the exchange, and are reported on the exchange’s trading system. They have a direct impact on the stock price, as they reflect the demand and supply of the stock in the market. A single bulk deal may not have a significant effect, but multiple bulk deals can create a momentum in the price movement.
Block deals are transactions that occur in a separate trading window, before the regular trading hours of the exchange. They are not reported on the exchange’s trading system, but are disclosed to the public after the completion of the deal. They do not have an immediate impact on the stock price, as they do not affect the market equilibrium. However, they can generate interest and curiosity among other investors, who may follow the footsteps of the institutional investors. This can lead to an increase or decrease in the stock price in the subsequent trading sessions.
Summary
This article explained the difference between block deals and bulk deals, and how they can influence the stock price. Both deals are carried out by large institutional investors, who may have an edge over other investors in terms of information and analysis. Therefore, many retail investors track these deals to get a glimpse of their investment strategy. However, a smart retail investor will not base their investment decisions solely on these deals, but will also conduct their own research on the stocks involved.
