A block deal is a substantial exchange of shares or securities between two parties outside the public market, typically arranged through negotiation. It usually involves a significant quantity of shares or securities, often surpassing 0.5% of a company’s total outstanding shares.
What Is a Block Deal In Share Market?
A block deal occurs when a trade involves more than 500,000 shares or shares valued above Rs. 5 Crores of a specific company listed on the exchange. Such trades are only allowed during a designated trading window in the early hours, from 9.15 AM to 9.50 AM.
Block deals are disclosed to the stock exchange where the securities are traded and are commonly employed to accomplish specific investment objectives, such as modifying exposure to particular stocks or sectors.
How Does Block Deal Affect Share Price?
By trading a significant portion of a company’s shares, bulk deals can have a more notable effect on the stock’s price, potentially leading to more significant price fluctuations in the market.
The block deal window remains accessible for 35 minutes after the start of trading. Any block trades within this timeframe must be instantly reported to the exchange by the broker and cannot be squared off within the same day. These transactions, involving a significant portion of a company’s shares, can potentially induce noteworthy price fluctuations in the stock.
Difference Between Bulk And Block Deals – Block Deal Vs Bulk Deal
The primary difference between Block and Bulk Deals lies in their reporting requirements. Block deals necessitate immediate reporting to the stock exchange after execution, ensuring transparency. Conversely, bulk deals are reported at the end of the trading day, leading to delayed disclosure.
1. Scale
Bulk deals entail trading a substantial number of shares or securities, which is significant but remains below 0.5% of a company’s total outstanding shares. Conversely, block deals involve an even larger volume of shares.
2. Reporting Requirements
Block deals necessitate immediate reporting to the stock exchange within a specific timeframe after execution. In contrast, bulk deals are reported after the trading day.
3. Trading Process
Bulk deals transpire within the standard stock exchange trading process, while block deals are negotiated directly between two parties outside of the open market, often facilitated by intermediaries.
4. Trading Oversight
Stock exchanges and market regulators oversee bulk deals, while Block deals are monitored by these authorities but are subjected to more stringent regulations and enhanced reporting obligations.
5. Objectives
Block deals are predominantly executed to fulfill precise investment goals, such as altering exposure to a particular stock or sector. On the other hand, bulk deals serve a broader array of purposes, including market-making, portfolio adjustment, and institutional investment strategies.
Block Deal Meaning – Quick Summary
- A block deal in the stock market involves over 5 lakh shares or a value exceeding five crores in a single trade.
- Bulk deals involve a large part of a company’s shares and can significantly affect the stock’s price, possibly causing larger price swings.
- The main difference between Block and Bulk Deals is in reporting. Block deals require immediate reporting for transparency, while bulk deals are reported at the trading day’s end, causing delayed disclosure.
- Bulk deals occur within the standard stock exchange trading process, while block deals are privately negotiated transactions outside the open market, often facilitated by intermediaries, involving direct agreements between two parties.
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What Is a Block Deal In Share Market? – FAQs
What is a Block Deal in the Share Market?
A block deal in the share market involves the sale or purchase of a significant number of shares, typically more than 5 lakh shares or a total value exceeding five crores, in a single transaction.
What happens to shares after a Block Deal?
After a block deal, the share price may experience volatility due to the large transaction size, impacting supply and demand dynamics in the market.
What is the limit of a Block Deal?
The minimum value for a block deal is five crores or 5 lakh shares. There is no upper limit, but stock exchanges may set maximum limits.
Who can participate in a Block Deal?
Institutional investors, mutual funds, and high-net-worth individuals can participate in block deals, subject to exchange regulations.
What is the difference between a Bulk Deal and a Block Deal?
The difference between a Bulk Deal and a Block Deal is that the bulk deal is for a quantity between 5,000 and 5 lakh shares, whereas a block deal involves quantities exceeding 5 lakh shares or a value above five crores.
What is the time of the Block Deal session?
The block deal session occurs during a specific time window determined by the stock exchange, often at the end of the trading day.
Is a Block Trade good or bad?
A block trade’s impact on the market can be positive or negative. It provides liquidity but may cause short-term price fluctuations, making it essential for investors to assess the potential impact.
