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Tuesday, January 17, 2017

Block and Bulk Deals

 




Bulk and block deals done on exchanges are keenly watched by market participants daily as they indicate the interest of big investors in a stock. Though these two terms sound similar, there is a difference between them. Here's what they mean and how investors should interpret them

1. What is a block deal?

It is a transaction of a mini mum quantity of 500,000 shares or a minimum value of Rs 5 crore between two par ties, wherein they agree to buy or sell shares at an agreed price among themselves. The deal takes place through a separate trading window and they happen at the beginning of trading hours for duration of 35 minutes i.e. from 9.15 am to 9.50 am. Every trade has to result in delivery .

Rules set by the Securities and Exchange Board of India state that the price of a share ordered at the window should range within +1% to -1% of the current market price or the previous day's closing price. Block deals are not visible to the regular market as they happen in a separate market window. The block deal orders are notified to ex changes and are disclosed on the bourse's website with details such as name of the company , client, quantity of shares transacted and the average price at

2. What is a bulk deal?

A bulk deal is a trade where total quantity of shares bought or sold is more than 0.5% of the number of shares of a listed company. Bulk deals happen during normal trading window provided by the broker.The broker who manages the bulk deal trade has to provide the details of the transaction to the stock exchanges whenever they happen. Unlike block deals, bulk deal orders are visible to everyone.

3. Who are the participants in such deals?

It is usually deep-pocketed in vestors like fund houses, foreign institutional investors, banks, insurance firms and HNIs given the high amount required to enter into such transactions and the percentage of shares involved.

4. How do bulkblock deals influence a stock?

Investors often look at bulk and block deals to judge interest of big investors in a stock. If several deals happen in a stock continuously over a period of time, it can be viewed as a sign of confidence and stock price may rise in the near future. But a big institution or investor buying shares through such deals does not necessarily mean that the stock will rise. Many a time, the large block of share purchase, which is disclosed to the exchange, could be the last leg of buying by the large investor, who wants to signal his interest in the stock. In short, some large HNIs use this as a bait to attract more buyers.






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