Block Deals vs Bulk Deals: Understanding how they impact stock price movements

Block Deals vs Bulk Deals: Two forms of large volume deals made in the stock market are block deals and bulk deals. 'Block deals and bulk deals'- despite sounding similar, their major differences are reflected in their method of execution, effect on share prices, and regulation.

The following are the 4 main points of difference which differentiate block deals from bulk deals:

1) Definition:

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A block deal is a single large share transaction that usually comprises 5,00,000 shares or more, or a transaction value of Rs 10 crore or more.

While a bulk deal is a transaction of 0.5 per cent or more of a listed firm's equity shares.

2) Execution:

Block deals are carried out in a special trading window which is apart from normal trading hours. The special trading window exists from 8:45 am to 9:00 am and 2:05 pm to 2:20 pm.

However, bulk deals are carried out in normal trading hours and are made available to everyone in the market.

3) Impact on stock price:

Block deals do not have a significant immediate effect on stock prices since they are completed outside of normal trading hours.

Nevertheless, the revelation of block deals is capable of altering investor perception and triggering price action during subsequent trading sessions.

Bulk deals are likely to have an impact on the stock prices in real time because of their transparency and their execution at the point of order.

4) Compliance requirements:

Block deals have more stringent rules and reporting, but bulk deals are reported to the exchange, making them transparent and giving the market some insights.

How do they impact price movement in the stock?

Block and bulk deals both can influence stocks' prices, but the magnitude and timing of the impact are where they differ.

Block deals have a more pernicious impact because they are pre-agreed and executed in an alternate trading window.

Compared to bulk deals, however, their immediacy and visibility can immediately trigger price variations.

Frequently-asked questions (FAQs):

Q1) What is a block deal?

Ans: A block deal is a large trade of shares worth Rs 10 crores or more.

Q2) What is a bulk deal?

Ans: A bulk deal involves 0.5 per cent or more of a listed company's shares.

Q3) When are block deals executed?

Ans: Block deals are executed in a special trading window outside normal hours.

Q4) When are bulk deals executed?

Ans: Bulk deals are executed during normal trading hours.

Q5) How do block deals impact stock prices?

Ans: Block deals may influence prices in subsequent trading sessions.

Q6) How do bulk deals impact stock prices?

Ans: Bulk deals can cause immediate price fluctuations.

Q7) Are block deals transparent?

Ans: Block deals have tighter regulations and reporting requirements.

Q8) Are bulk deals transparent?

Ans: Yes, bulk deals are reported to the exchange, making them transparent.