GMP explained
Grey market premium is the unofficial price people pay for IPO shares before listing. It is useful as a mood reading — and unreliable as a prediction.
Grey market premium (GMP) is the extra amount, over the issue price, that buyers in an informal off-market are willing to pay for shares of an IPO that has not listed yet. If an IPO is priced at ₹100 and the GMP is ₹25, the grey market is implying a listing price around ₹125, i.e. a 25% premium.
How the number is formed
The grey market is a network of dealers, mostly in a handful of trading hubs, who quote two things: the premium on the share itself and a "Kostak" or "Subject to Sauda" rate for buying an entire application. Prices move on order-book chatter, anchor investor names, sector momentum and how the broader market is behaving that week. There is no exchange, no clearing house and no audit trail. Quotes you see published — including on this site — are collected from dealer sources and can differ from one aggregator to another.
Converting GMP into an expected listing price
- Expected listing price = issue price (usually the upper band) + GMP.
- Expected gain % = GMP ÷ issue price × 100.
- Expected profit per lot = GMP × shares per lot.
Our GMP tracker does this arithmetic for every live issue and shows the direction of the last few readings, which matters more than the absolute number.
Why GMP is legally grey
Trading in unlisted IPO shares before allotment is not a recognised, SEBI-regulated activity. Deals settle on trust, there is no investor grievance mechanism, and counterparty default is a real risk. SEBI has repeatedly cautioned investors against relying on grey market quotes. Treat GMP strictly as information about sentiment, never as a trade you should participate in.
How to read GMP sensibly
- Watch the trend, not the level. A GMP that has slid from ₹60 to ₹20 over three days says more than the ₹20 itself.
- Check it against subscription data. High GMP with weak QIB demand is a warning; both strong together is a more consistent picture.
- Discount thin issues. On small SME offers, a handful of trades can move the quoted premium dramatically.
- Re-check on the last day. Sentiment often shifts once total subscription numbers are public.
- Never size a position on GMP alone. Read the RHP, look at valuation multiples versus listed peers, and decide whether you would hold the stock if it listed flat.
Common misconceptions
- "High GMP means I will get allotment." No — allotment is a lottery in an oversubscribed issue, and strong sentiment usually makes allotment harder.
- "GMP is the guaranteed listing price." No. Listing price is discovered in the pre-open call auction on listing day and can be well below the premium implied earlier.
- "Zero GMP means the IPO is bad." Not necessarily. Some solid businesses are priced fairly, which leaves little room for a first-day pop.