Bulk & Block Deals

Research By: Saizal Agarwal

Bulk Deal:

In the stock market, a Bulk Deal is a transaction in which a single entity, such as an institutional investor, mutual funds, HNIs or a prominent trader, buys or sells a huge amount of a company's shares in a single trade.

A “bulk” deal constitutes all transactions in a scrip (on an exchange) where the total quantity of shares bought/sold is more than 0.5% of the number of equity shares of the company listed on the exchange. The quantitative limit of 0.5% can be reached through one or more transactions executed during the day in the normal market segment.

Disclosure of Bulk Deal:

• The brokers need to disclose to the stock exchange the name of the scrip, name of the client, quantity of shares bought/sold and the traded price.
• The disclosure shall be made e by the brokers immediately upon execution of the trade or within one hour of the closure of the trading session.
• The Stock exchanges disseminate the information on the same day after market hours to the general public.

Block Deal:

Block deal is execution of large trades through a single transaction involving the exchange of shares in quantities exceeding Rs. 5,00,000 or in cases where the total traded value surpasses Rs. 10 crore (earlier 5 crore till 2017) For this purpose, stock exchanges are permitted to provide a separate trading window known as “block deal window”:

• Morning Block Deal Window: 

This window shall operate between 08:45 AM to 09:00 AM. The reference price for execution of block deals in this window shall be the previous day closing price of the stock. 

• Afternoon Block Deal Window:

This window shall operate between 02:05 PM to 2:20 PM. The reference price for block deals in this window shall be the volume weighted average market price (VWAP) of the trades executed in the stock in the cash segment between 01:45 PM to 02:00 PM. Between the period 02:00 pm to 02:05 pm, the stock exchanges shall calculate and disseminate necessary information regarding the VWAP applicable for the execution of block deals in the Afternoon block deal window. 

It generally involve large institutional investors, such as mutual funds, insurance companies, pension funds, and foreign institutional investors (FIIs). They are usually not open to retail investors. 

Every trade executed in this block deal windows must result in delivery and shall not be squared off or reversed. 

Disclosure of Block Deal:

The stock exchanges shall disseminate the information on block deals such as the name of the scrip, name of the client, quantity of shares bought/sold, traded price, etc.

The exchange makes the details of the block deal public immediately after the trade is executed, usually at the end of the block deal window.

Basis	Bulk Deals	Block Deals
Definition	Involve the purchase or sale of a large quantity of shares of a company's stock, typically exceeding a predefined threshold (e.g., 0.5% of total shares).	Involve the sale or purchase of a substantial number of shares (typically 5 lakh or more shares or a total value exceeding Rs. 10 crore) in a single transaction.
Transaction Size	Smaller compared to Block Deals.	Larger compared to Bulk Deals.
Impact on market	May have a limited impact on the stock's price, as they do not involve a significant percentage of the company's shares.	Can have a more significant impact on the stock's price, as they involve a substantial portion of the company's shares, potentially leading to price fluctuations.
Reporting Requirements	Must be reported to the stock exchange within a specific time frame.	Must be reported to the stock exchange within a shorter time frame than Bulk Deals.
Disclosure	The names of buyers and sellers are disclosed to the public after the transaction is completed.	The names of buyers and sellers are disclosed to the public immediately after the transaction is executed.
Purpose	Often used by retail and institutional investors for portfolio management or trading purposes.	Typically used by institutional investors, such as mutual funds, to acquire or dispose of a significant stake in a company.
Regulation	Regulated by stock exchanges (NSE,BSE) and market regulators (SEBI in India)	Also regulated by stock exchanges and market regulators but is subject to stricter rules and reporting requirements.
Market Reaction	Less likely to attract immediate attention from the market and traders.	More likely to attract attention from market participants, leading to increased trading activity and volatility.

Impact of Bulk Deal on Price of stock:

Bulk deals influence the price of the stock in real-time, as they are out on the exchange’s trading system during regular trading windows. While a single bulk order may not be able to sway the price in a particular direction, multiple bulk orders have the potential to do so. 

• Market Reaction: If a bulk deal involves buying a large volume of shares, it can signal strong confidence in the stock’s future prospects, potentially driving up the stock price as other investors might follow suit. Conversely, a large sell-off can indicate negative sentiment, leading to a drop in the stock price.

Example: In 2020, Reliance Industries saw significant bulk deals when various institutional investors bought substantial amounts of shares. For example, the entry of Facebook as an investor in Reliance Jio led to a surge in Reliance Industries’ stock price due to positive market sentiment and confidence in the company's growth prospects.

Impact of Block Deal on Price of stock:

Block deals are carried out in separate trading windows, resulting in no real-time or immediate change in the price.

• Market Perception: Block deals can affect investor perception. For example, if a major shareholder is selling a large block of shares, it might signal that the shareholder believes the stock has peaked, leading other investors to sell.

Example: In 2016, HDFC Ltd. experienced a block deal where a large quantity of shares was sold by a major institutional investor. The block deal led to a temporary drop in the stock price as the market reacted to the large sale.