What is GMP (Grey Market Premium)?

GMP stands for Grey Market Premium. It is the price at which IPO shares are bought and sold in the unofficial grey market before the IPO officially lists on the stock exchange.

The grey market is an unofficial, unregulated market where traders buy and sell IPO shares and applications before the listing date. SEBI does not regulate or recognize grey market trading.

How is GMP Calculated?

GMP Formula:
Expected Listing Price = Issue Price + GMP

Example:
If an IPO has issue price of ₹200 and GMP is +₹50
Expected listing price = ₹200 + ₹50 = ₹250
Expected listing gain = 25%

If GMP is negative (example -₹20)
Expected listing price = ₹200 – ₹20 = ₹180
Expected listing loss = -10%

What Does GMP Tell You?

Positive GMP — Strong demand in grey market. IPO may list above issue price. Higher the GMP, stronger the expected listing.

Negative GMP — Weak demand. IPO may list below issue price. Negative GMP is a warning sign.

Zero GMP — Neutral sentiment. IPO may list at par (issue price).

High GMP (above 20%) — Very strong demand. May indicate overvalued grey market expectations.

What is Kostak Rate?

Kostak is the amount a seller receives for selling their entire IPO application in the grey market before allotment. It is a fixed amount regardless of allotment.

Example: If Kostak rate is ₹500, you receive ₹500 for selling your application regardless of whether you get allotment or not.

What is Subject to Sauda?

Subject to Sauda (SS) is a deal where the buyer pays only if the seller gets allotment. If the seller does not get allotment, the deal is cancelled.

Is GMP Reliable?

GMP is NOT always reliable. It is based on unofficial trading and can be manipulated. Consider these points:

1. GMP changes daily and can fluctuate significantly
2. Very high GMP sometimes leads to disappointing listings
3. Small IPOs with low float tend to have volatile GMP
4. GMP is more reliable for large mainboard IPOs with high subscription
5. Never invest solely based on GMP — always check company fundamentals

Where to Check GMP?

GMP data is available on unofficial grey market sources. We collect and update GMP daily on our IPO GMP Today page. You can also check investorgain.com for historical GMP data.

GMP vs Actual Listing Performance

Studies show that GMP has around 70-75% accuracy for large mainboard IPOs. For SME IPOs the accuracy is lower due to lower liquidity in grey market. A GMP of +20% or more has historically had a higher chance of positive listing.