IPO GMP (IPO Grey Market Premium) indicates the price grey market operators are willing to pay for a given stock. Grey market (also called gray market) is an informal setup used by traders to buy and sell shares and is not recognized by stock exchanges. Since IPO GMP tells us about the premium someone is willing to pay, it is often used to forecast listing price of public offers. GMP of several IPOs has correctly predicted eventual listing prices, although it is not always accurate. Recent positive listings of Ami Organics and Vijaya Diagnostics point in this direction. Subsequently, Paras Defence and Space Technologies and even some SME IPOs have garnered strong demand in the informal market.
Latest IPO GMP rates (24 September 2021, in INR)
|IPO Company||Price Band||GMP||Kostak||Subject to Sauda|
|Aditya Birla AMC|
(29 September – 1 October)
|695 – 712||50||400||–|
(21 – 23 September)
|165 – 175||250||250||12,000|
|Jainam Ferro Alloys|
(28 – 30 September)
(27 – 30 September)
(20 – 22 September)
(15 – 17 September)
|82 – 84||–||–||–|
|Markolines Traffic Controls|
(15 – 17 September)
A gray market transaction involves the unofficial agreement between an IPO investor and a stock broker which allows investors to lock profits before the stock lists. Under this system, shares allotted to IPO applications are sold by brokers without transferring the shares to their accounts. Since this is an unwritten accord between two parties, it entirely depends on the trust between the investor and broker.
Important points about IPO GMP and grey market:
- IPO grey market movements may change very quickly and rates may be volatile. It is risky to base an investment decision on gray market IPO rates alone. Please refer to our research and analysis section for more details.
- Research has shown that retail investors are strongly influenced by market sentiment and as a result, are prone to overreaction, especially when it comes to IPO investing. Place your bets wisely!
- IPO GMP rates are provided as sourced from market intelligence. Please note these IPO GMP rates may be different for you depending on geographies, markets and dates.
- We don’t trade into grey market nor do we facilitate buying or selling of IPO forms.
What is IPO GMP (IPO Grey Market Premium)?
IPO GMP is the rate of premium an IPO commands in grey market. In simple terms, this premium indicates the price grey market buyers are willing to pay over and above the allotment price asked by the company. As such, GMP indicates that the offer is likely to list at higher prices and reward successful applicants. On the other hand, IPO grey market discount indicates that the offer is likely to list at lower rates.
The IPO grey market is an informal setup and it operates between IPO start date and listing date. The premium fluctuates daily on the basis of IPO demand and situations in the secondary market. It is observed that GMP goes up with wider markets and similarlly, comes down in subdued conditions.
What is Kostak rate?
Kostak rate is the amount an investor gets by selling his/her IPO application in grey market. This is the amount an investor stands to get, irrespective of allotment status. As an example, a kostak rate of INR300 indicates that an investor selling his application will receive this amount even if there is no allotment and even if the stock is listed at a discount to allotment price.
What is Subject to Sauda?
‘Subject to’ is another term frequently used in grey market to denote a sauda for buying a firm allotment application. In other words, this is the amount buyers are ready to pay for an application which has been allotted shares. Naturally, this amount is much bigger than Kostak. A seller in this case gets this amount even if the stock lists at lower rates than the allotment price. The risk of a discounted listing is borne by the buyer.
In case of no allotment, the sauda stands cancelled. As one can see, there is a trade-off between kostak and Subject to Sauda trades and while investors can make big money in the second one, s/he gets nothing in case of no allotment. In contrast, s/he can lock a small profit by selling the application at kostak rates.
Income tax implications of grey market trades
Since grey market is an informal market, all profits will be in the name of IPO applicant who sold his/her application. IPO grey market trades are mostly settled in cash which means that actual trades happen in the applicant’s account. This directly puts the tax liability on the applicant.
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Participate in lively IPO discussion and benefit from the perspective of other readers. Here is a list of the current, forthcoming and recently closed mainboard and SME IPOs in India. Click on the respective IPO and scroll down to the comments section.
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If you spot a new IPO and wish to nudge us about it, just drop us a comment below the text. Alternatively, you can write to us at admin at ipocentral.in. Here are some more resources for you:
- Best IPOs that doubled investors’ money in 5 years
- Upcoming IPOs in 2021
- Top cryptocurrencies for your portfolio in India
- Option Trading Basics – Types, Definitions, Strategies, Benefits
- 7 common IPO mistakes and how to avoid them
- IPO Allotment Process: Here is how it works
- All-time largest IPOs in India at a glance
Alternatively, you can check out our dedicated sections on IPO News, SEBI approval status, IPO Review and Buybacks. If you are new to IPOs, you might want to go through our resources section which contains lot of information about the best practices to follow when it comes to primary markets.