Brief note on the bulk stock selling in global markets in past days

A bulk deal is one in which the total number of shares purchased or sold exceeds 0.5 percent of the
total number of shares in a publicly traded company. Bulk deals occur during the broker's regular
trading window. The broker who handles the bulk deal trade is required to provide the specifics of
the transaction to the stock exchanges if they occur. Bulk deal orders, unlike block deals, are
available to everyone.

1.  Bulk deals are indicative of concentration of interest..

This can be looked at as a signal of building interest in a particular stock. Normally, bulk deals tend to
be indicative of a sudden spurt in interest from informed investors. If you take the directional bulk
deals on the NSE and BSE over a period of time and see the impact on stock price, it is quite evident
that where there is concentration of interest from informed institutions, there is a positive impact
on prices. The reverse holds in case of consistent selling. A word of caution is warranted here. Many
smart investors skirt the bulk deal reporting by executing slightly lower than the 0.5% mark. So don’t
take the bulk deals data as entirely indicative.

2.  Separate the intraday trades and the bulk transfers..

Out of the bulk deals data, you need to separate the non-directional data. The first set of such data is
the intraday trades’ data and the short term trade data. These are proprietary books and large
investors just trying to ride onto a trend for short term profits. They do not indicate anything. The
second set of such data is the bulk transfers among institutions. You get to see large positions in the
bulk deals segment that is nothing but FIIs, MFs, large HNIs and promoters actually shifting
ownership around. Thirdly, be cautious if the bulk deals are from arbitrage funds or if the bulk deals
are backed by heavy shorting in futures. That is most likely an arbitrage position and not a
directional indication.

3.  Focus on bulk deal trends over a period of time..

This is possibly the most important take-away from the bulk deals data. Ideally, take the
consolidated bulk deals data for a period of 2 year and try to sort it based on the stock and the date.
That will give you a clear idea of how the stock prices have moved in conjunction with the bulk deals.
It will also give you an idea of which traders and investors are typically the most adept at catching on
to trends as evidenced by future movement in prices. When you combine these factors, the bulk
deals actually become meaningful and actionable from a stock selection perspective.

There is an important caveat here. Bulk deals only reveal part of the interest build-up in the stock
and many times may not be indicative. But longer term bulk deals aggregation does give you
important clues. But, at best these bulk deals can be a starting point for you. The onus is then on you
to do your detailed study and homework before embarking on an investment decision. The moral of
the story is that there is a lot of hidden wisdom in bulk deals; you just need to use it cautiously!
Sundaram 

BNP Paribas

 NSE -1.57 % Mutual Fund today sold 3.9 million shares or 3.1 per cent stake in Healthcare Global
Enterprises at Rs 185 per share through two bulk deals on the National Stock Exchange.