Definition
Grey Market Premium (GMP)
GMP is the unofficial, over-the-counter premium at which IPO shares or applications trade before listing, used as an informal indicator of expected listing gains.
The grey market is an unregulated, informal network of dealers who trade in IPO shares and application rights before the official listing. The GMP — say ₹50 over a ₹100 issue price — is a rough proxy for what the stock might list at, but it is neither monitored nor endorsed by SEBI or the exchanges.
GMP is highly speculative and can swing wildly or vanish before listing day. Indian regulators have repeatedly cautioned investors not to base decisions on grey market chatter, as it carries no settlement guarantee and is prone to manipulation.
Related terms
- Kostak RateThe Kostak rate is the fixed amount a grey-market buyer pays to acquire an IPO application, regardless of whether shares are ultimately allotted.
- Listing GainListing gain is the profit an investor makes when an IPO share lists on the exchange above its issue price.
- Subject to Sauda'Subject to Sauda' is a conditional grey-market IPO deal where an applicant agrees to sell their allotted shares for a fixed premium — but the trade only settles if the application actually receives an allotment.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.