Grey market premium (GMP) is the rupee difference between the price at which an upcoming A company's first offer of its shares to the public, after which the shares are listed on a stock exchange and can be bought or sold by any investor. Read the full meaning of IPO share is quoted in the unofficial grey market and the issue price fixed for the IPO. The quote is made before the share lists on NSE or BSE Ltd, formerly the Bombay Stock Exchange, is a Mumbai based electronic exchange where shares and other securities are traded under SEBI oversight. Read the full meaning of BSE (Bombay Stock Exchange), and the market where it is made is not an exchange.
For individuals asking what is grey market premium in an IPO, the basic idea is that the indicated grey price will be the issue price plus the GMP.
The term is industry and broker usage and it is not an official definition from SEBI is the statutory regulator of India's securities market, with the legal duty to protect investors and to promote and regulate that market. Read the full meaning of SEBI, RBI, NSE or BSE.
Where the figure comes from
The grey market is an unofficial over the counter (OTC) market, where IPO shares or applications are traded through brokers and dealers before the IPO lists on NSE or BSE.
For an IPO with an issue price of Rs 100, a GMP of Rs 20 will give an indicated grey price of Rs 120.
SEBI, NSE and BSE neither regulate nor recognise these deals, and none of them publishes GMP data, so the figures investors see come from private trackers.
What a high or low GMP tells you
A positive GMP means the grey market price is above the issue price. A low or negative GMP points to weak demand, and the share may list at or below the issue price.
The figure shows how dealers are assessing demand, and it does not promise any listing price, it can also change quickly within a few days.
Listing price also depends on institutional demand and subscription numbers, along with market trends on the listing day.
Kostak rate, another grey market term, is a fixed price paid for an IPO application regardless of allotment, while GMP is the premium on each share.