Latest IPO GMP (Grey Market Premium), IPO GMP Today

The IPO Grey Market Premium, also called IPO GMP, is trending for the following Mainboard and SME IPOs: Desco Infratech (BSE), Shri Ahimsa Naturals (NSE), and ATC Energies (NSE).

Current IPO GMP with Estimated Listing Gain

Note for Investors: A high GMP reflects bullish investor sentiment, indicating expectations of a price rise post-listing. Conversely, a low GMP signals a bearish sentiment, suggesting anticipated price declines. Demand dynamics influence whether an IPO lists positively or negatively.

What is IPO GMP?

The IPO GMP, or the IPO Grey Market Premium, refers to the difference between the initial issued price and the estimated listing price in the grey market. Before an IPO is officially listed on the stock exchanges, there is a period in which unofficial trading of IPO shares occurs, known as gray market trading. This is an over-the-counter market where the buying and selling of shares happen without the involvement of stock exchanges.

The difference in price at which IPO shares are traded in the grey market is called the Grey Market Premium (GMP). It indicates the level of investor interest in that particular IPO. However, it is important to note that the GMP is not always a reliable indicator of how the stock will perform once it is listed on the exchange.

Various factors, including demand from institutional investors and overall market conditions, can influence the share price on the listing day. The GMP merely reflects the investors’ sentiment at a specific point in time. The stock’s actual performance will depend on several factors, including the company’s performance and market conditions.

The listing price of the IPO can vary from the estimated price suggested by the grey market. In some cases, IPOs with high grey market premiums list below expectations, while others with low premiums initially may list higher than anticipated.

Therefore, treating the grey market premium as just a source of information or for educational purposes is advised. Before investing in any IPO, you should not base it solely on grey market predictions but should also consider other essential factors.

Important Points to Consider about IPO GMP

The grey market transactions are unofficial, involving both IPO investors and stockbrokers. The transactions depend on the trust established between both parties.

• Before applying for an IPO, it is advisable to read our IPO analysis.
• The grey market rates are calculated and provided by market research experts or sourced from reliable information.
• We do not recommend trading in the grey market as it is illegal.
• The Kostak Rate refers to the premium one gets by selling their IPO application (in an off-market transaction) to someone else before the allotment or listing of the issue.
• Do not subscribe to an IPO solely based on the premium mentioned above. It can change anytime before the listing.
• Make your investment decision by considering the fundamentals of the company.

What is Grey Market Premium?

The IPO Grey Market Premium (IPO GMP) refers to the premium or additional price at which IPO shares are traded unofficially before they are officially listed on a stock exchange. This premium reflects the market’s perception of the potential value and demand for the shares.

The term “Grey Market Premium,” or IPO GMP, is commonly used in the IPO market to estimate the potential listing price of an IPO. Although unofficial, investors frequently check the grey market price to gauge a stock’s expected fixed gain before the IPO lists and during the period from the IPO start date to the allotment date. The grey market premium can indicate how the IPO might perform on the listing day by providing an estimated price.

Let’s understand how the IPO GMP calculation works. If a company launches an IPO at ₹100 and the grey market premium is ₹20, we might assume that the IPO could list at ₹120 on the listing day. However, this is just an assumption, and there is no guarantee of accuracy.

In most cases, IPO GMP provides a good indication, but in some cases, it does not. Suppose the IPO is in high demand, and the estimated HNI (High Net-Worth Individual) and QIB (Qualified Institutional Buyer) subscriptions are higher. In that case, the IPO may list around the expected price, supported by the estimated GMP.

What Factors Influence IPO GMP?

Several factors contribute to the IPO Grey Market Premium:

• Company Fundamentals: Strong financial performance, growth prospects, and a reputable management team can positively impact the GMP.
• Market Conditions: General market sentiment, sector performance, and economic factors are crucial in determining investor interest in an IPO.
• Demand and Supply Dynamics: The number of shares available and the level of investor interest are significant factors in determining the GMP.

What is Kostak Rate?

The Kostak rate is the amount one investor pays to the seller of an IPO application before the IPO is officially listed. As the grey market reacts, Kostak rates also fluctuate accordingly.

Investors can buy and sell their full IPO applications at Kostak rates outside the formal market, fixing their profit. The Kostak rate applies regardless of whether the investor gets an allotment. The buyer must still pay the Kostak rate for the IPO application.

For example, if an investor submits five applications for an IPO and sells each at ₹1000, they secure ₹5000 in profit. Even if the investor receives allotment in only two applications, the profit remains ₹5000.

However, if the investor later sells the stock and earns a ₹10,000 profit, they must give ₹5000 to the investor who bought the application. This method ensures a secure way to sell IPO applications in the grey market.

What is Subject to Sauda?

With the Kostak rate, the Subject to Sauda refers to the amount decided when the investor receives firm allotment for their IPO application. If someone buys or sells an IPO application on a subject to sauda, they only receive the agreed amount if the allotment is confirmed.

If no allotment occurs, the sauda gets canceled. This means that one cannot fix their profit, as it depends on the allotment. For example, if an investor sells the application at ₹10,000, and the listing price goes up to ₹15,000, they must pay ₹5000 to the person who bought the application.

How to Calculate GMP?

The IPO GMP (grey market premium) refers to the price at which shares are traded in the grey market before the official listing. It is calculated based on factors such as the company’s performance, demand in the grey market, and the likelihood of subscription.

Let’s take an example: if an IPO is priced at ₹200, and the grey market shows a premium of ₹100, the IPO might list around ₹300 (₹200 + ₹100). However, this is just an estimate, and the actual listing price may vary from the grey market prediction.

Are Grey Market Stocks Safe?

It depends on the broker or trading entity involved. However, we suggest that it is not safe. Trading in the grey market is done at your own risk, and there can be significant price fluctuations.

As mentioned, the grey market should only be used to estimate listing gains. We recommend being cautious and trading in the primary market after the listing.

How Do I Buy / Sell IPO Application in the Grey Market?

There are no official brokers or businesses associated with the grey market. Some brokers deal in IPO applications based on Kostak Rates or Subject to Sauda Rates, following the IPO GMP trends. To engage in grey market trading, one must find local brokers who facilitate the buying and selling of IPO applications. It is important to know the rates before deciding to buy or sell.

Significance of IPO GMP

The IPO Grey Market Premium is a key indicator of market sentiment and the perceived value of IPO shares. It helps potential investors gauge the demand level and determine the premium they might have to pay to purchase shares during the IPO. However, it is important to remember that the GMP does not guarantee future performance and can change over time.

IPO GMP FAQs