Advantage BSE in block deals

The Bombay Stock Exchange (BSE) has widened its lead over the National Stock Exchange (NSE) in the block deal segment.

In 2008, the volume of block deals on BSE was Rs 16,377 crore, compared with NSE’s Rs 4,754 crore. The corresponding numbers for the previous year were Rs 15,180 crore and Rs 8,509 crore, respectively.

A block deal is a trade with a minimum quantity of 500,000 shares, or with a minimum value of Rs 5 crore through a single transaction window on the bourses.

Market experts attribute the high volume of block deals on BSE to low trading volumes in the cash market. This leads to more execution of block deals. BSE sees an average daily trading volume of Rs 3,000 crore in the cash market compared to Rs 7,000-8,000 crore on NSE.

Jagannadham Thunuguntla, chief executive officer of SMC Capitals, said since BSE in general has lower trading volumes than NSE, chances of spillover of a block deal are much less. This means deals can go through faster on BSE.

“On NSE where trading volumes are much higher, trading is done on a first-come-first-serve basis. So lesser number of trades gets entirely executed at one time,” added Thunuguntla.

However, things could be improving for NSE. Since January 2009, there have been six block deals on the exchange with a total volume of Rs 232 crore compared to four deals with Rs 56 crore volumes on BSE.

The situation is almost the same in case of bulk deals. While transaction in the bulk deal segment of BSE amounted to Rs 70, 657 crore in 2008, it was Rs 65,752 crore on NSE. A bulk deal takes place when 0.05 per cent of equity shares of a company listed in the exchange is transacted.

In aggregate terms, block deals have seen a dip of 11 per cent in 2008, compared to 2007. Even the number of trades has dropped 30 per cent. That is, there were 411 block deal trades in 2008, as against 589 in 2007.

Analysts said that high net worth individuals, foreign institutional investors and other big corporate investors have stayed away from large-sized deals last year, leading to the fall.

There could be a lull in the coming year as well. Siddharth Bhamre, fund manager (derivatives and equities), Angel Broking, said that the number of deals this year could either be lesser or just the same as last year.