What are Block Deals and Bulk Deals?

block deals and bulk deals

When trading in the Indian share market, you must have come across terms such as bull deals or block deals. If you skim through newspapers that list the companies and their stock, you might find these terms there as well. When a large number of shares are traded on the NSE or the BSE then these deals are called a bulk deal or a block deal. The volume of the shares involved in such deals is huge. Here we share all the information you need to know about what are block deals and bulk dealstest.

What is a Bulk Deal?

A bulk deal is a deal wherein the total quantity of shares bought or sold is more than 0.5% of the number of equity shares of the listed company. A bulk deal can only happen when the broker provides a trading window at normal trading hours. A bulk deal is a market-driven deal.

A bulk deal is visible to everyone trading on the stock exchange. The broker who is facilitating the trade is required to notify and revel about the deal to the particular exchange. Here if the deal is done through a single transaction then the broker needs to inform the exchange immediately. If the deal has gone through multiple transactions then the broker needs to notify the exchange within an hour from the close of the trading day. The details to be given are as follows:

  • Details of the Scrip
  • Name of the Client
  • Volume/Quantity of shares bought/sold
  • Trade price

Once this information is shared with the exchange, they are required to make this information public. This is done after the closure of trading hours but on the same day of the implementation of the trade.

It is mandatory for the bulk deals to result in delivery. A Securities Transaction Tax or an STT is charged on the orders in the same way as it is charged on all other orders in the day.

What is a Block Deal?

A block deal is a trade which is for more than 5 Lakh shares, or for a value of more than Rs. 5 Crores of a company. A block deal can only be conducted in a special trading window. This window is open from 9: 15 AM to 9:50 AM.

The price at which the block deals can be done is in the range of +1% to -1% of the current market price/ the previous day’s closing price. Just like the bulk deal, the broker conducting the trade needs to notify the NSE/BSE that such a trade has been conducted on the exchange. The details to be notified are as follows:

  • Details of the Scrip
  • Name of the Client
  • Volume/Quantity of shares bought/sold
  • Trade price

A block deal happens when the two parties involved agree to buy or sell shares at an agreed-upon price. The number of buyers and sellers for block deals is limited as not many investors trade in such large quantities. If the block deal has to be traded then the quantity and the rate of the shares should be exactly the same as that of the opposite block order deal. This means that the block order deal is matched with the counter dealing with the same quantity and rate on a time priority.

It is mandatory to trade the block deal fully. If not then the trade gets canceled. With the advancement in technology, through online share trading or share market apps, the block deal remains in the system only for a period of 90seconds, post which it gets canceled and it not executed.

For example, if you as an investor enter into a block deal of 6 Lakh shares at Rs. 80 and another trader enters a block deal order for 6 Lakh shares at Rs. 80 then the deals match. This order will be executed. This is because of the quantity and the price is the same.

Let us take a look at another example.

One trader enters the block deal order for 10 Lakhs Shares at Rs. 90
Another trader enters the block deal for 20 Lakh shares at Rs. 90
The third trader enters the block deal order for 10 Lakh shares at Rs, 90

In the above example, the deal will not be executed as the quantity does not match even though the price is the same.

Who Participate in Block and Bulk Deals?

Major participants in such kinds of deals in the stock market are institutional players, HNIs, mutual fund companies, insurance companies, capitalists and foreign institutional investors.

When block deals or bulk deals happen in equity trading or any other type of trading, it is not an indicator that the prices will go up or down. However, if the bulk deals are happening in a share consistently, then it may indicate a variance in the share price in the future. One should not blindly follow block/bulk deals as a trading strategy in stocks. Investors are advised to look into the fundamentals of the company, its historical performance, future plans, etc before they start investing in the company.

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