Block & Bulk Deals : There are two types of participants in the stock market known as Institutional Participants and Retail Participants. Be it investment or trading both type of participants are active by their own virtues. Institutional investors are large bodies who invest in the capital market in huge quantities thus leading the direction of the market. Some of the popular participating institutions are FIIs, DIIs, Banks, Fund Houses, Insurance Companies, and other large HNIs. When these large bodies invest or disinvest in very large quantities you may observe sudden up surge or down surge in the script or stock. Often you may see the price of stock, which was stagnant for quite sometime, shooting up by a large magnitude suddenly due to bulk purchases by these large bodies of investors. These type of large orders in the stock market are called “Bulk Deals” and “Block Deals”.
Institutional investors have got very strong research teams having access to important market data and tools for analysis for profitable results, hence their decisions are well informed and timely planned. Thus we can say following their studies can be profitable and successful for retail investors most of the time we catch the move soonest possible.
Bulk and block deals done on exchanges are keenly watched by market participants daily as they indicate the interest of big investors in a stock. Though the two terms (Block Deal and Bulk Deal) sound similar, there is a difference between them. Here’s what they mean and how investors should interpret them.
Block Deal : Usually a Block Deal happens when two parties agree to buy or sell shares at an agreed price among themselves and inform the exchange. Block deal is a transaction of a minimum quantity of 500,000 shares or a minimum value of Rs 5 crore between two parties, wherein they agree to buy or sell shares at an agreed price among themselves. The deal takes place through a separate trading window (called Block Deal Window) and they happen at the beginning of trading hours for duration of 35 minutes i.e. from 9.15 am to 9.50 am. Every trade must finally result in the delivery of stock, means they can’t be traded that day. The orders in a block deal are not shown to the people who trade from normal trade window.
The Securities and Exchange Board of India (SEBI) rules state that the price of a share dealt at the window should range within +1% to -1% of the current market price (CMP) or the previous day’s closing price. Block deals are not visible to the regular market as they happen in a separate window.
These block deal orders are disclosed and displayed in the website bourse. The details such as the name of the script, average price, quantity of shares bought or sold, company name, client name etc, etc.
Bulk deals : A bulk deal is a trade where total quantity of shares bought or sold is more than 0.5% of the number of shares of any listed company. Bulk deals are market driven and can happen during normal trading window, during the trading day, provided by the broker. The broker who manages the bulk deal trades has to provide the details of the transaction to the stock exchanges whenever they happen to take place. Unlike block deals, bulk deal orders are visible to everyone.
The broker, who facilitates the trade, has to provide details of the trade to the stock exchanges whenever it happens. If the bulk deal happens through a single trade, it should be notified to the exchange immediately upon the execution of the order. If it happens through multiple trades, it should be notified to the exchange within one hour from the closure of the trading.
Who participate in Block and Bulk deals?
Major participants in bulk and block deals are deep pocketed institutional players like FIIs, DIIS, Mutual Funds, Fund Houses, Financial Institutions, Insurance companies, Banks, venture capitalists, HNIs etc, etc. The window is also used by many promoters of the companies.
How does Bulk and Block deals influence stock and investors?
Serious investors and even well informed retail participants also, often, look at block and bulk deals to gauge the direction of market for future investment cues. If many deals happen in a particular stock continuously over a period of time, it can be viewed as a sign of strengthening confidence and stock price may rise in the near future. However, a large financial institution or investor buying shares through such deals may not necessarily mean that the stock will rise. Many a time, the large block of share purchase, which is disclosed to the exchange, could be the last leg of bull cycle in that stock thus initiated buying by the large investor, who wants to signal his interest in the stock to general partisans. In short, it could be bait for attracting by large fund house or HNIs. It could also be done by an operator driven counter. Hence, its important to understand the profiles of the institutions involved in the deal. It could be used as just one of the parameters when investing in a stock for investment, but look at other factors such as a fundamentals, financial performance, business moats, management and its future plans.
To learn all the concepts in details and to master the skills of trading and investing in the stock
market you can contact us and become a skilled and profitable trader and investor.
You can contact us for more information by visiting our website : www.http://www.prajacademy.com
or following us on Twitter : https://twitter.com/TraininginStock
or getting connected on https://www.facebook.com/StockMarketCourse
or call on 8080940750/04/03
