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WTF: Reading Too Much Into Bulk Deals


Firstly, apologies for the small hiatus in posting. I am consulting with ICreate, a company that does banking BI (and is founded by two close friends, so excuse my glorification), and we’re trying to do great things in a compressed time-frame. And then I have the young V and the younger Z that demand my attention at home, since they are largely confused about what this whole "going to office" business is, what with my working from home for nearly all the time since V was born 5 years ago. So writing has taken a back seat, which is why I deeply apologize.

To come to the meat of this rant, which is a WTF. While data has become more widely available, such data can lead to abysmal reporting if people do not attempt to understand the data properly. Recently I have been noticing that journalists, when they want to report on a company, take bulk-deal data from the NSE/BSE, and then use it to suggest conclusions. Today’s Mint report on OnMobile had this gem:

OnMobile rose 8.93% to Rs.36.60 on BSE on Tuesday, with 7.2 million shares being traded on the bourse. The benchmark Sensex index rose 1.3% to 17,618.35 points.

Interestingly, bulk trades in the stock on Tuesday appeared to indicate that buyers and sellers were the same. BSE data showed Crosseas Capital Services Pvt. Ltd and an individual, Devendra Kumar Dharamveer Sharma, bought 891,000 shares and 831,000 shares at Rs.34.95 and Rs.35.58 apiece, respectively. They also sold the same amounts— 891,000 and 831,000 shares—at Rs.34.80 and Rs.35.57 apiece, respectively.

On the National Stock Exchange, Alive Consultants Alive and Devendra Kumar Dharamveer Sharma bought 1.14 million shares and 1.935 million shares at Rs.35.46 and Rs.35.57 apiece, respectively. They sold the same amount— 1.14 million and 1.935 million—at Rs.35.47 and Rs.35.60 apiece, respectively. The entities couldn’t be reached immediately for comment.

You know why they couldn’t be reached? Because they are arbitrageurs. They don’t care if the company is OnMobile or TarBall or WidgetCo.  If it can be arb-ed, it will be arb-ed.

Crosseas is a known arb-player, and the other fellow is probably a random newbie using Adroit or some other classic-arb software to automatically bridge the differences between the NSE and BSE. (The software takes a buy-sell position in the two exchanges when the differences in price of the same security reach a certain level and then reverse the position when the prices converge, giving the trader a profit net of transaction costs) You don’t hold such positions overnight – you always square off by the end of the day.

To any serious stock market participant, a buy and sell bulk-deal is to be eliminated from all analysis. The exchanges only report them because they have to, if the volume of trade is more than a certain percentage (0.5%) of all the shares of a listed company, by the same party, on the same day. These arbitrage trades routinely reach such limits and the reporting of their trades is useless.

Reading too much into such bulk-deal data is not worth the internet real estate it occupies. It remains a WTF. (Note that Mint above was just an example, I’ve seen issues with nearly all financial magazines on bulk-deal-overanalysis)


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