What is Grey Market Premium (GMP)?
The extra amount buyers are willing to pay over the IPO issue price before the stock lists on the exchange.
The Grey Market Premium (GMP) is an unofficial, unregulated premium that buyers in the informal 'grey market' are willing to pay over the official issue price of an IPO before it lists on the stock exchange.
For example, if an IPO is priced at ₹100 per share, and the GMP is ₹25, the estimated listing price would be ₹125.
Why is GMP Important?
GMP is primarily used as an indicator of retail and HNI sentiment. A high, stable GMP usually suggests strong demand and a potential listing gain. A negative GMP (discount) indicates weak demand or broader market pessimism.
Risks
Because the grey market is entirely unregulated (transactions happen on mutual trust between dealers), GMP figures can be easily manipulated by large syndicates. Investors should never base their entire investment decision solely on GMP.