The Complete IPO Guide for Indian Investors · Chapter 11 of 15
Grey Market Premium (GMP): What It Is and How to Use It
What it is
GMP is the unofficial premium or discount at which IPO shares are said to be dealt informally before they list. If the issue price is ₹100 and the GMP is ₹20, the market is guessing a listing near ₹120.
Unofficial and unregulated
The grey market is not recognised by SEBI or the exchanges. Quotes are informal, can be wrong and can be influenced by those with something to sell. Never treat GMP as a fact or as advice, and never trade in the grey market yourself.
How people use it
Investors watch the trend more than the number: a rising GMP through the subscription days suggests improving demand, while a collapsing one is a warning. It is one input alongside valuation, subscription and market conditions.
Checking the quality of a quote
Look at the time of the quote, whether several sources agree and whether the figure moves in step with subscription news. A single stale number copied between websites is of little value.
Further reading
The third book in this library, Grey Market Premium: The Insider's Guide, covers this subject in ten chapters, including how to log GMP against actual listing results.
Key takeaways
- GMP is an informal, unofficial indicator.
- The trend is more useful than any single number.
- It can be wrong and can be influenced; never rely on it alone.
- Do not deal in the grey market.