Bulk deals catch fancy as market situation improves

The bulk and block deal scenario on stock exchanges is hotting up. There have been trades in excess of Rs 2,500 crore in the past couple of days.

ING Bank on Thursday sold Kotak Mahindra Bank shares worth Rs 800 crore on the National Stock Exchange. Two days ago, Rabobank sold shares worth Rs 164 crore (6.25 million shares at Rs 263.4) of YES Bank. And, HCL Corp sold 2.5 per cent stake in HCL Tech.

One reason for the trend is increased activity by banks, some for their own portfolios and some for clients. Citi and ICICI Bank have also been pruning and churning their portfolios. In two separate transactions on June 18, Citi, through its arm, Citigroup Global Markets Mauritius, sold shares worth Rs 45 crore in HDFC, and it was Royal Bank of Scotland who was at the other end, by buying 161,000 shares. It also reduced its share in Infosys, Tata Motors, ICICI Bank and Axis Bank.

“The markets have been good and some scrips have touched their 52-week highs. There has been a lot of appreciation and there will be people wanting to book profits,” said Madhusudan Kela, CIO Reliance Mutual Fund. Also, the buyer has the advantage of having a discount to the price, Kela adds.

“Bulk deals are an easier way to get the right price, as most of the time the price is pre-negotiated and executed on the exchange, lowering transaction costs. There are no regulations for this,” said Sudip Bandhopadhyay, MD & CEO, Convexity Solutions. The other reason is that the growing activity itself has encouraged a new set of buyers and sellers. According to Devesh Kumar, group CEO & joint managing director, Fortune Group, “This is a clear indication of emergence of buyers and sellers in the market.”

“Till some time ago, people were negative. So, large blocks were not traded much. In other words, there were sellers but no buyers. That has changed now,” said Kumar. “Jobbers, who sell and buy bulk shares in a day to get advantage of thin price movements, dominated the bulk market category. However, we are seeing genuine trades now,” said a broking company executive.

Technically, a trade with a minimum quantity of 500,000 shares or a minimum value of Rs 5 crore executed through a single transaction on the special window qualifies as a block deal. According to stock exchanges, trading members are required to disclose on a daily basis all deals that have been executed by them on behalf of their “client” or “own” account in the block deal window.