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Difference Between Bulk Deals and Block Deals?
Often in the stock markets, we hear about a stock moving higher or lower because of some bulk or block deal. Here we will understand the two terms and the difference between them.
What is a bulk deal?
In a bulk deal as the term implies over 0.5% of the outstanding shares of the listed company are either bought or sold. Say as per the latest NSE Bulk deal data, HDFC Ltd sold 4,35,796 shares in Ansal Housing on June 21. Typically, these transactions are carried out during the normal course of the trading day on the exchanges. Further, such a transaction can be undertaken either in one shot or through multiple transactions.
As a bulk deal transaction involves larger sums, the participants in such deals are HNIs, institutional entities including bank, mutual funds, hedge funds etc.
In contrast to block deal orders, bulk deal transactions can be traced by everyone, while block deals are kept confidential.
What is a block deal?
As per the BSE provided FAQs on Block deal, it is "A single trade having quantity greater than or equal to 500,000 shares or value greater than or equal Rs. 5 crores, executed through Block deal window". So, it is indeed a deal between two parties for a minimum quantity of 5 lakh shares or a minimum value of Rs. 5 crore, wherein they agree to transact in the security at an agreed price.
Further as per the FAQs, traders can initiate such deals only during the first 35 minutes of the continuous trading session i.e. from 9:15 am to 9:50 am.
Importantly, block deal is allowed only in cash segment. All the block deal trades, have to be settled on a trade-to-trade basis (e.g. as trades are settled in "T" Group). Every trade executed must result in delivery and cannot be squared off or reversed.
As far as the disclosures on block deals are concerned, these are notified to the exchanges. The stock exchange website then puts it forth as name of the company, client, quantity of shares and the average price at which the deal occurred.
How do bulk or block deal in a stock affects it?
The block or bulk deals in a security/listed share is often a representative of the increasing interest in the scrip. If multiple deals are executed in a stock over a period of time then it underlines confidence in the stock and likewise its share price can trend higher in the near term. Also, sometimes the route is taken on to by large investors to attract more buyers in a particular scrip.
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