What is IPO GMP A Simple & Clear Explanation

1. What is IPO GMP? A Simple & Clear Explanation When an IPO is about to hit the market, investors often start discussing one important term — IPO GMP, which stands for Grey Market Premium. In simple words, IPO GMP shows how much extra price people are willing to pay for an IPO share before it officially lists on the stock exchange. The grey market is an unofficial and unregulated market where IPO shares or applications are bought and sold even before listing. This activity gives an early idea of investor demand. How IPO GMP is Calculated The formula is straightforward: IPO GMP = Grey Market Price – IPO Issue Price Example: If the IPO issue price is ₹200 and the grey market is showing ₹230, then the GMP is ₹30. A positive GMP means investors expect the stock to list at a premium. A negative GMP means market confidence is low and the listing may happen at a discount.

2. What is Live IPO GMP? Live IPO GMP refers to real-time updates of the grey market premium. Because demand keeps changing, GMP doesn’t stay the same. It rises or falls based on: ● Subscription numbers ● Market sentiment ● Company fundamentals ● HNI and retail investor interest ● Overall market mood Live GMP helps investors track whether bullishness is increasing or fading as the listing date approaches. For example: ● If an IPO’s GMP is rising daily → demand is strong ● If it keeps falling → sentiment is weakening. Why IPO GMP is Important for Investors Investors track IPO GMP because it acts as an early sentiment indicator. Here’s why it matters: 1. Predicting Listing Gains By adding GMP to the issue price, investors get a rough estimate of the expected listing price. Example: Issue price: ₹200 GMP: ₹30 Estimated listing: ₹230 2. Understanding Market Sentiment GMP shows how much excitement or caution the market has around the IPO. 3. Making Better Subscription Decisions Investors often use Live GMP to decide:

3. ● Should I apply? ● Should I avoid? ● How strong is the demand? 4. Comparing IPOs Tracking live GMP across different IPOs helps investors choose better opportunities. Limitations & Risks of IPO GMP Even though GMP is popular, investors should be careful because: 1. Grey market is unregulated It is not monitored by SEBI. All trades are informal. 2. GMP can change quickly Just before listing, GMP can rise or fall sharply depending on market trends. 3. Possibility of manipulation Operators or big players can influence GMP artificially. 4. Not always accurate Sometimes listing gains differ from what GMP predicted. 5. Short-term indicator only GMP shows short-term sentiment — not the long-term strength of the company. Related Terms You Should Know Kostak Rate The price at which a full IPO application is bought/sold in the grey market. Subject to Sauda

4. A conditional contract where payment is made only if the IPO allotment is successful. Final Thoughts IPO GMP and Live IPO GMP are helpful tools for understanding listing expectations and market enthusiasm. They give investors an early idea about potential listing gains. However, while GMP is useful, it should never be the only basis for investing. Investors should also check the company’s financials, valuation, subscription data, and overall market conditions.