EN
The stock market is a place where shares are bought and sold by a number of participants. Besides the retail investor, there are large institutions such as investment banks, mutual funds, hedge funds, pension funds, foreign institutional investors (FIIs), high net worth individuals (HNIs), company promoters, etc. to name a few. These institutional investors and high net worth individuals come with deep pockets and detailed knowledge of companies and markets not always available to the retail investor. As a result, the trading patterns of these large investors are different from those of the retail investors. Two common types of transactions entered into by large and institutional investors are block deals and bulk deals. Though the two names sound similar, they are in fact very different in nature from each other.
Key Takeaways
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Block deals are large transactions executed in a special window, minimising impact on stock prices.
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Bulk deals happen during regular market hours and are visible to all, potentially affecting stock prices.
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Block deals offer privacy, not visible to retail investors during execution, unlike bulk deals. However, the privacy is only during execution, after-market disclosures are mandatory.
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Both deal types provide liquidity, with block deals suited for institutional trades and bulk deals showing immediate market interest.
Block Deal
A block deal refers to a large, privately negotiated transaction where two parties buy or sell shares in bulk, either more than 5,00,000 shares or a value exceeding ₹25 crores. These trades take place through a separate block deal window, ensuring minimal impact on market prices.
A block deal in share market transactions is conducted only during this special window and does not appear on regular volume charts viewed by retail traders. SEBI has laid down specific rules for executing block deals. They can be carried out only during two exclusive 15-minute sessions, one in the morning and one in the afternoon.
Orders must be placed within a narrow price range defined by the Block Reference Price, which is calculated using either the previous closing price or the stock’s volume-weighted average price for the relevant period. If a buy or sell order remains unmatched, it is cancelled and cannot be carried forward to the next session.
Benefits of Block Deals
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Enable large transactions without disturbing the regular market price or causing sudden volatility.
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Provide better price transparency and execution efficiency since terms are agreed upon privately between two parties.
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Help maintain market stability by keeping bulk trades outside normal trading hours.
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Allow promoters, institutions, and high-net-worth investors to adjust or rebalance their holdings smoothly.
Also, check out After Hours Trading here.
Bulk Deals
A bulk deal refers to a transaction where an investor buys or sells 0.5% or more of a company’s total listed shares in a single trading session. Unlike a block deal, bulk deals occur during regular market hours and are visible to all traders. Since these trades are executed openly, they appear on volume charts and can influence price movement in real time. To ensure transparency, brokers must report bulk deals to the stock exchanges, including trade size and participant details.
Bulk deals can also be executed in the block deal window if they meet the required conditions such as being 0.5% of the share capital. This gives investors the option to decide whether they want to execute the trade privately through a special window or during normal market hours.
When confidentiality is important, investors may opt for the block window, while those comfortable with market visibility can choose to execute the transaction as a bulk deal.
Benefits of Bulk Deals
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Improve transparency because trades are visible to all market participants during live market hours.
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Allow large investors to buy or sell significant quantities without special windows or negotiated prices.
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Reflect strong market sentiment, helping traders gauge demand or supply for a specific stock.
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Provide liquidity to the market as sizable volumes get traded in a single session.
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Enable investors to react quickly to opportunities without waiting for restricted trading windows.
Also, check our Share Market Timings here.
Block Deals vs Bulk Deals: An Overview
|
Feature |
Block Deals |
Bulk Deals |
|
Minimum Size |
5,00,000 shares OR ₹25 crore |
0.5% of the total listed shares of a company |
|
Trading Window |
Special block deal window (8:45 AM - 9:00 AM & 2:05 PM - 2:20 PM) |
Regular trading hours |
|
Visibility |
Not visible to retail investors |
Visible to all market participants |
|
Impact on Price |
Limited impact as executed outside regular hours |
May influence stock prices in real-time |
|
Order Matching |
Unmatched orders are cancelled |
Orders remain in effect until filled |
|
Disclosure |
Details are not disclosed until after the execution |
Details reported to exchanges at day's end |
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Privacy |
Offers more privacy to parties involved |
Less privacy as details are publicly available |
|
Block Window Execution |
Mandatory |
Optional (can also be executed during regular hours) |
The Impact of Bulk deals and Block deals on Prices
Bulk and block deals can be indicative of interest building up or waning in a particular stock. However, these signals need to be processed meticulously and matched with other trends and indicators to arrive at a trading decision.
Mere execution of a bulk order does not necessarily mean that a particular stock is likely to move in the direction of the bulk trade. However, repeated bulk transactions in a particular direction – whether buy or sell – may be indicative of interest in the stock in the direction of the bulk trade.
Conclusion
Block deals and bulk deals are two kinds of market transactions used by institutional investors, large funds, and HNIs to transact large volumes in the stock market. Each has its own set of features and advantages. Whereas bulk deals are visible to everyone as they are transacted during regular market hours, block deals are transacted in a special trading window and afford a slightly greater degree of privacy to the parties concerned.
However, bulk deals also need to be reported to the bourses at the end of the day and the information made available to the public. Investors can make use of data on bulk and block deals as one set of indicators in their trading strategy as they may indicate large corporate interest in the direction of the trade. However, this data needs to be used with caution as it can often be misleading.