What is grey market premium?

The GMP stands for Grey Market Premium, which is the additional amount investors are willing to pay for any IPO share in the unofficial or grey market, before the share lists officially on the stock exchange.

How does the grey market premium work?

Since trading occurs outside official exchanges, the GMP provides an informal gauge of investor sentiment. Example: Suppose Stock Y's IPO issue price is ₹100, and the grey market premium is ₹300. This implies investors are willing to buy the stock at ₹400 (₹100 + ₹300), indicating strong demand before the stock lists.

How much grey market premium is good?

For example, if shares in an IPO are issued at ₹300 and trading at ₹360 in the grey market before their listing, the grey market premium is ₹60. A high GMP, sometimes even 3–4 times the issue price, may signal strong listing day gains, while a lower or falling GMP may indicate weak investor appetite.

Is GMP a good indicator for IPO?

GMP is a key, though unofficial, indicator of market sentiment and investor excitement before an IPO hits the official stock exchange. A positive GMP signifies robust demand, potentially impacting the opening market price post-listing.

What is grey market in simple words?

A gray market is an unofficial platform where financial securities are bought and sold before official trading begins, or when they are suspended from trades. Although gray markets operate outside typical retail channels, they remain legal and offer insights into market demand.

What is Grey Market Premium (GMP) in IPO?

Is grey market legal in the UK?

Sale of “grey” goods in the UK is a criminal offence under the Trade Marks Act 1994. Grey market goods/parallel imports are genuinely manufactured goods by the trade mark owner, for a particular jurisdiction, that are subsequently imported into a jurisdiction not authorised by the brand owner.

Why is grey market cheaper?

In the grey market, blocked distributers purchase goods at a lower cost than that imposed by manufacturers. This system entails buying goods at a lower rate, and selling them through illegal distribution channels.

Is GMP trustworthy?

Investors take cues from the GMP for the listing price and to gauge the overall response to an IPO. However, GMPs may not always be an accurate indicator as the grey market is susceptible to manipulation.

How do I sell my IPO in GMP?

An investor applies for a certain number of shares of an IPO. But the investor wants to sell the shares even before it gets allotted. To make the sale possible, they contact a grey market dealer. The dealer gets in touch with the buyer and quotes a grey market price (which includes the GMP).

How to increase chances of IPO allotment?

What happens if GMP is low?

IPO GMP acts as a sentiment indicator. If the GMP is high, it usually means the IPO is in high demand. If the GMP is low or negative, investors may be cautious. Many retail investors use GMP to decide whether they should apply for an IPO or not.

How to read grey market premium?

The GMP price is the price at which IPO shares are sold and bought on the grey market. If the grey market premium is Rs 80 and the issue price is Rs 100, the grey market price is Rs 180, and buyers and sellers trade at this price or can manipulate it.

How to tell if a stock is trading at a premium?

If the share price is higher than the Net Asset Value, then the unit or shares are trading at a premium and conversely, if the share price is lower than the Net Asset Value, the unit or share is trading at a discount.

How to avoid the grey market?

Countering the grey market menace

Utilize selective distribution agreements: Strategically control and restrict distribution by implementing contractual arrangements that only enable specific distributors or suppliers to sell products in designated territories or channels.

Are grey markets illegal?

The grey market, a term frequently used in the world of trading, refers to the trade of a commodity through channels that are unofficial, unauthorized, or unintended by the original manufacturer or producer. While the name might suggest something illicit, it's important to note that grey market trading is not illegal.

How to make profit in IPO for beginners?

Can I sell share after an IPO allotment?

You may sell the shares allotted under the IPO at any time on or after the listing date. It is up to the investors to decide whether to hold the shares or sell them on the listing date. If the listing price is higher than the issue price, investors may sell their shares if they realise the targeted profit.

How to know profit in IPO?

The IPO Return Calculator helps you estimate profits or losses from IPO investments. Just enter the IPO name and number of shares to see estimated returns. If you had invested ₹5330.00, you would have earned ₹292.00 bringing your total returns to ₹5622.00.

What are the problems with GMP?

This reflected the former state pension ages and is the root of the inequality that is inherent in GMP s. Most occupational pension schemes followed the state pension system in having unequal retirement ages for men and women (usually, but not always, age 60 for women and age 65 for men).

What is an example of a bad GMP?

Inadequate, incomplete, or inaccurate documentation is one of the most common GMP violations. This includes missing batch records, incomplete Standard Operating Procedures (SOPs), and insufficient documentation of deviations and corrective actions.

Can GMP be negative?

A positive GMP represents that investors are bullish on that stock by believing the stock price will go up after listing, and are ready to pay a higher price, whereas a negative GMP represents that investors are bearish on that stock by believing the stock price will go down after listing, and are ready to pay a lower ...

Is grey market counterfeit?

The gray market, also known as parallel imports, involves the sale of genuine products through unauthorized sales channels. These gray market activities are distinct from counterfeiting, as they involve legally obtained products that are resold in markets outside the authorized distribution channels.

Is eBay considered a grey market?

The gray market is unauthorized trade in goods, but not illegal trade. Ebay was created as a gray marketplace, none of the sales on there were explicitly authorized by the manufacturer of the goods but they also weren't illegal.

Who buys in the grey market?

Grey markets play a demand and supply situation, and the traders and retail investors buy the shares before they get listed. If an individual wants to exit the IPO for any reason, the grey market offers a way out. Individuals can also buy IPO shares even after missing the deadline.