Why Investors Watch GMP

Investors follow GMP to guess how much listing gains they might make. For some, the GMP helps decide whether to apply for the IPO or skip it. But remember: GMP is unofficial — it’s only an indication, not a guarantee.

How Does Grey Market Trading Work?

In the Grey Market:
 ✅ People buy IPO applications (called ‘sauda’).
 ✅ They also buy and sell shares before listing.
 ✅ Transactions are cash-based and depend on trust.

This is why the Grey Market is riskier than official trading.

What is Kostak Rate?

Apart from GMP, you may hear about the Kostak Rate. This is the price someone is willing to pay to buy an entire IPO application. For example, if the Kostak Rate is ₹500, you can sell your application for that amount regardless of allotment.

Is Grey Market Legal?

No. The Grey Market is unofficial and unregulated. It’s not illegal in the sense of criminal law, but SEBI does not recognise it. So, there is no legal protection if a deal goes wrong.

Pros & Cons of GMP

✅ Pros:

• Gives an early signal about demand.
• Helps predict listing gains.
• Useful for traders aiming for quick profits.

❌ Cons:

• No regulation or guarantee.
• Prone to manipulation.
• Can mislead new investors if they rely only on GMP.

GMP vs Official Listing

Sometimes, GMP predictions are accurate. Other times, they can be very wrong due to market changes. For example, if global markets crash just before listing, the stock may list lower than GMP.

Should You Trust GMP?

The answer is simple — take GMP as a hint, not a promise. Combine it with:
 ✅ Company fundamentals
 ✅ Subscription numbers
 ✅ Industry trends

A smart investor always looks at the full picture.

How to Track GMP

You can check GMP on:

• IPO tracking websites
• Telegram groups (be cautious!)
• Social media
• IPO forums

Always compare multiple sources because GMP can differ slightly.

Table: Top IPOs & GMP

Note: GMP can sometimes fail — as seen with Paytm.

What Beginners Should Do

If you’re new:
 ✅ Don’t invest based on GMP alone.
 ✅ Read the prospectus.
 ✅ Study the company’s growth potential.
 ✅ Talk to your advisor if needed.

Conclusion

Now you know what is Grey Market Price (GMP) and how the Grey Market works. It’s an interesting part of India’s IPO culture. Use it as an extra indicator — but always invest based on facts, not rumours.

FAQs (10)

Q1: What is GMP in simple words?
 👉 It’s the premium price for IPO shares before official listing.

Q2: Is GMP reliable?
 👉 It’s an indicator, not a guarantee.

Q3: Where can I see GMP?
 👉 IPO forums, websites, dealers, or social media.

Q4: Can GMP change daily?
 👉 Yes, GMP fluctuates based on demand.

Q5: What is Kostak Rate?
 👉 It’s the price for an entire IPO application.

Q6: Is the Grey Market legal?
 👉 It’s unofficial — not regulated by SEBI.

Q7: Can new investors use GMP?
 👉 Yes, but combine it with other research.

Q8: What if GMP is negative?
 👉 It means weak demand — be cautious.

Q9: Does every IPO have GMP?
 👉 Popular IPOs usually have active GMP. Small ones may not.

Q10: Should I sell my IPO in the Grey Market?
 👉 It’s risky — better to wait for official listing.