Grey Market Premium – Explained
GMP (Grey Market Premium) is the price at which IPO shares are traded informally before they officially list on stock exchanges. This unofficial market – called the grey market – operates outside SEBI regulation and gives investors a rough estimate of expected listing gains.
How GMP is Calculated
GMP is expressed as a premium over the IPO issue price:
- Issue Price: ₹500 per share
- GMP: ₹80
- Expected Listing Price: ₹500 + ₹80 = ₹580
- Expected Gain: 16%
GMP can also be negative, indicating the market expects shares to list below the issue price (called a discount).
Where Does GMP Come From?
The grey market is an informal network of dealers who buy and sell IPO application forms or kostak (the value of the application itself) before allotment. Post-allotment, they trade the shares before listing. These dealers gauge demand based on subscription data, company fundamentals, and market sentiment.
Is GMP Reliable?
GMP is a sentiment indicator, not a guarantee. Here's what you need to know:
- High GMP + strong subscription usually means a good listing – but not always.
- Market conditions on listing day can override GMP expectations entirely.
- GMP can be manipulated by operators to create artificial hype.
- It is most reliable in the last 24–48 hours before listing.
Never make investment decisions based solely on GMP. It is one data point among many.
GMP vs Kostak
| Term | Meaning |
|---|---|
| GMP | Premium per share above issue price in the grey market |
| Kostak | Premium paid for an entire IPO application form (regardless of allotment) |
| Subject to Sauda | Deal valid only if allotment happens |
How IPOGaze Tracks GMP
We aggregate GMP data from multiple grey market sources and update it multiple times a day. Our GMP Tracker shows the trend over time so you can see whether sentiment is rising or falling – which is often more meaningful than a single data point.