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Understanding stock market block and bulk deals

10 Dec 2023

Introduction

Being an investor in the Indian stock market, it is crucial to know various trade execution transactions. When exploring the D-street, you might have encountered the terms block deal and bulk deal. These two types of transactions involve buying or selling a large number of shares in a single or multiple trades. Block and bulk deals can indicate the interest and confidence of big players in a particular stock or sector. They can also impact the price and volume of the traded shares. 

Let's understand block and bulk deals, how they differ, and their advantages and disadvantages for buyers and sellers.

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Understanding block deals

A block deal is a transaction that involves buying or selling at least 5 lakh shares or shares worth at least Rs. 5 crore in a single trade. The execution of this transaction is possible only in a separate trading window of 35 minutes, which is open from 9:15 am to 9:50 am. The price of a block deal must be within +1% to -1% of the current market price or the previous closing price, whichever is higher. 

In settling a block deal, the buyer and seller must exchange shares and money within two working days. Both parties must also disclose the deal to the stock exchange within 30 minutes of the trade.

Advantages and disadvantages of block deals

A block deal has some advantages and disadvantages for buyers and sellers. One advantage is that a block deal offers confidentiality, as the identity of the buyer and seller is not revealed to the public. This type of transaction also provides liquidity, as the buyer and seller can execute a significant transaction in a single trade without affecting the market price. 

A disadvantage of a block deal is that it has a limited trading window, which reduces the flexibility and opportunity for the buyer and seller. Such transactions can also have a price impact, as the market may react to the disclosure of the deal and adjust the price accordingly.

Understanding bulk deals

A bulk deal is a transaction that involves buying or selling more than 0.5% of the total number of shares of a listed company in a single or multiple trades. It can be executed anytime during regular trading hours, except for the first 15 minutes and the last 15 minutes of the trading session. 

The price of such transactions can differ depending on the shares' demand and supply in the market. A bulk deal can be settled by delivery or intraday, meaning the buyer and seller can square off their positions within the same day. At the end of the trading day, the broker executing a bulk deal must disclose it to the stock exchange.

Advantages and disadvantages of bulk deals

The most significant benefit of such deals is they offer visibility, as the identity of the buyer and seller is revealed to the public. Another advantage is they provide flexibility, as the buyer and seller can execute a large transaction anytime during trading hours. 

However, they come with a downside. A disadvantage of a bulk deal is that it lacks confidentiality, as the market can see the intention and strategy of the buyer and seller. They can also affect the market sentiment, as the market may perceive the deal as a positive or negative signal for the stock or sector.

Conclusion

Block and bulk deals are two types of transactions that involve buying or selling a large number of shares in the Indian stock market. They have different criteria and features, such as the minimum quantity, value, price range, trading window, delivery, and disclosure. They also have various advantages and disadvantages for buyers and sellers, such as confidentiality, liquidity, visibility, flexibility, price impact, and market sentiment. 

Block and bulk deals can provide valuable insights and opportunities if you are looking for long-term or short-term gains in the stock market. However, to participate in or benefit from block and bulk deals, you should be aware of the aspects highlighted above and monitor market trends and movements.

 

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