Mint Explainer | Sebi’s new block deal rules—everything investors should know

The regulator’s 8 October circular aims to make these transactions more transparent, better aligned with genuine institutional activity, and less prone to market volatility.

Mint explains what block deals are, the key changes introduced by Sebi, and how these reforms may impact market participation.

What has Sebi changed in the block deal framework?

Block deals are large, single-transaction trades executed through a separate window to prevent significant price volatility in the regular market.

Sebi issued a circular stating that:

The minimum qualifying amount for a block deal has increased to ₹25 crore, up from ₹10 crore.

Block deals must take place in one of two designated windows: a morning session (8:45 am–9:00 am) and an afternoon session (2:05 pm–2:20 pm).

Orders in both windows must fall within a ±3% band of the reference price. The morning reference price is the prior day’s closing price, while the afternoon reference price is the volume-weighted average price (VWAP) between 1:45 pm–2:00 pm that day.

Delivery settlement is compulsory, reinforcing that block deals represent actual investment transactions and cannot be reversed or squared off.

All details on block deals—scrip name, client, quantity, and price—will be released to the public after market hours on the same day.

These changes will be enforced 60 days from the circular’s issue.

Why the higher minimum order size?

Sebi intends the new ₹25 crore threshold to distinguish genuine institutional trades from smaller, potentially speculative or opportunistic deals.

Raising the minimum block deal size to ₹25 crore is unlikely to dent liquidity, as most recent transactions already exceed this threshold, said Mayank Mundhra, FRM-VP and Head Research at Abans Financial Services. “Instead, it will refocus activity toward genuine institutional trades and reduce speculative participation. Mandatory, delivery-based settlement and post-market disclosures will further enhance transparency and investor confidence."

However, not all experts are convinced the move will be frictionless. Narinder Wadhwa, MD & CEO of SKI Capital, said, “On one hand, [the higher limit] will ensure only serious, large institutional trades qualify as block deals, improving the overall quality and credibility. However, this higher threshold could marginally reduce liquidity, particularly in mid-cap and less liquid stocks," he said.

Wadhwa added that some participants may shift trades back to the regular market, potentially increasing market impact costs and fragmenting liquidity.

National Stock Exchange data accessed by Mint shows that block deals totalling ₹1.79 trillion were executed in FY25, with the trend continuing into FY26— ₹83,981 crore worth of block deals were recorded in just the first quarter.

How do the new trading windows and price bands work?

The two distinct block deal trading windows aim to streamline large-scale transactions and contain price volatility:

Morning window (8:45–9:00 am): Reference price is the prior day’s closing price.

Afternoon window (2:05–2:20 pm): Reference price is VWAP from trades between 1:45 pm–2:00 pm.

Trades must be executed within a ±3% price band, curbing opportunistic pricing and front-running strategies.

Exchanges will play a key role in ensuring strict compliance and the implementation will be largely automated through the exchange trading systems. “The system will be configured to reject any block deal orders placed outside the prescribed price band," Wadhwa said.

Orders beyond the ±3% range—based on the previous close for the morning window or VWAP for the afternoon window—will not enter the system. Similarly, orders entered outside the designated trading windows will be automatically invalidated or carried over to the next permissible window, depending on exchange rules.

For enforcement, Sebi has empowered exchanges to take disciplinary action against violations. Penalties can range from monetary fines to trading suspensions for repeat offenders.

Wadhwa explained that VWAP linkage, in particular, curbs opportunistic pricing and front-running strategies by anchoring block deal prices to broader market behaviour. “This will likely prevent extreme price fluctuations that sometimes accompany large block trades and make pricing more aligned with actual market movement."

Prashant Mishra, founder & CEO, Agnam Advisors, added that, “This framework minimises the risk of sudden price shocks caused by surprise block transactions and makes speculative positioning harder, as participants now operate within transparent and predictable bands."

Impact on market transparency and investor confidence

The circular mandates post-market disclosure of all block deal details. Experts widely agree this will enhance market integrity.

Mundhra highlighted that mandatory, delivery-based settlement and post-market disclosures will enhance transparency and investor confidence. “While tighter norms may marginally reduce flexibility for some funds, it ultimately improves the quality of liquidity and promotes fairer, more regulated market practices," he pointed out.

Experts noted that informing the market about large institutional movements can improve price discovery and reduce information asymmetry.

“However, this higher level of scrutiny could also deter some market participants—particularly those who value discretion in executing large trades—from using the block deal route, as their transactions will now be more visible," Wadhwa said.

Who will be most affected?

Large institutions such as mutual funds, insurers, and sovereign investors are expected to continue using the block deal window.

“Larger funds will easily adapt, but smaller institutions and proprietary desks may find it harder to participate. This could reduce the number of trades in the block window but improve their quality and intent," Mishra explained.

“Mid-sized institutional investors, family offices, PMS (portfolio management services), and UHNI (ultra high-net worth individuals) clients trading below ₹25 crore will be shifted to the normal market, facing higher market impact, slippage, and potential information leakage," Ajay Kejriwal, CEO, Choice Equity Broking, cautioned.

Will trading behaviour change?

The consensus among experts is that block deal activity will shift.

“Expect fewer but larger block deals—likely dominated by big mutual funds, insurers, and FIIs," said Kejriwal. “Mid-size institutional volume might shift to negotiated trades executed through multiple small orders, or off-market transfers—reducing transparency overall."

“The focus will shift from the quantity of block deals to their quality, with more deliberate, conviction-based transactions dominating the segment," Mishra added.