What are Block Deals and Bulk Deals in the Share Market?

Key Takeaways

• Block deals transactions involve a minimum quantity of 5 lakh shares, or a minimum value of ₹10 crore.

• Block deal window timings: The morning session starts from 8:45 AM to 9:00 AM. The afternoon window starts from 2:05 PM to 2:20 PM.

• Bulk deals happen when an investor sells 0.5% of the total equity of the company.

Introduction to NSE BSE Block Deals and Bulk Deals

In the share market, large-volume transactions by institutional investors, promoters or high-net-worth investors can significantly influence share prices and overall market sentiment. Two important mechanisms through which such large quantities of shares are traded are block deals and bulk deals.

Block deals and bulk deals are reported every-day on NSE and BSE exchanges, helping investors track the movements of major market participants.

This article discusses the concept of block deals and bulk deals, their features, differences, and how they impact share prices.

What is a Block Deal in the Share Market?

A block deal refers to a single transaction in which a large quantity of shares is bought and sold between two parties. These transactions are executed at pre-agreed prices through a separate trading window provided by the NSE and BSE exchanges.

As per SEBI (Securities and Exchange Board of India) regulations, a block deal must involve a minimum quantity of 5 lakh shares, or a minimum transaction value of ₹10 crore.

Block deals are executed in a specific window known as the block deal window, which ensures minimal disruption to the regular market price.

The timings for the morning window are:

• Morning session: 8:45 AM to 9:00 AM.
• Afternoon session: 2:05 PM to 2:20 PM.

Example:

If a mutual fund wants to buy a large stake in a stock X, it may use a block deal window to avoid sharp price fluctuations in the live market session.

Features of Block Deal

Here are a few key features of the block deal in the share market:

• Pre-arranged transaction:

Block deal transactions are negotiated privately between buyer and seller before the execution.

• Separate trading window:

These trades are executed on special windows provided by NSE and BSE. This window helps to avoid sudden price fluctuations in the live market after such large quantity transactions.

• Minimum trade size:

The trade must meet a minimum threshold of ₹10 crore or 5 lakh shares.

• Price range restriction:

The deal must be executed within the price range prescribed by the NSE and BSE exchanges. Usually, the price band is close to the market price only.

• Confidential Execution:

Details of counterparties are not disclosed immediately to ensure privacy.

• Limited Impact on Price:

Since the trades happen in a separate window, it reduces the volatility in the share market.

What is a Bulk Deal in the Share Market?

A bulk deal happens when an investor buys or sells 0.50% or more of a company’s total equity shares in a single trading session.

Unlike block deals, bulk deals happen during regular market hours and are visible to all traders. Since they occur in the open market, they can lead to sharp price movements during the live trading session.

To ensure transparency, SEBI had mandated brokers to report the bulk deal orders to the stock exchange. This report will also include trade size and participant details.

Retail traders often track bulk deals because they reveal the activity of large players such as mutual funds, FIIs or promoters.

Features of Bulk Deal

Here are some important features of a bulk deal in the share market:

• Threshold limit:

A transaction qualifies as a bulk deal if it involves 0.5% or more of the total shares of the listed company.

• Executed in normal hours:

Bulk deal transactions take place during regular trading hours. There is no separate window for the trade execution.

• Multiple trades allowed:

Bulk deals can consist of multiple smaller trades aggregated over the day.

• Market impact:

Since these trades happen on the open market, they influence share price immediately.

Impact of Block Deals and Bulk Deals on Share Prices

Block deals and bulk deals can significantly impact the stock prices, but the nature of their impact differs.

Impact of Block Deals

Block deals are executed in a separate window; they have a limited impact on the stock prices. However, once disclosed, they may influence the investor sentiment.

For example, if a reputed institutional investor buys shares through a block deal, it may create a positive outlook for the stock.

Impact of Bulk Deals

Bulk deals can cause immediate price fluctuations because they occur in the open market. A large purchase order can lead to a rise in price, while heavy selling can lead to sharp declines.

Repeated bulk deals in the same direction can confirm a bullish or bearish trend in the share market.