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IPO and Grey Market Premium in India

Published on Monday, April 6, 2020 by Dilip Davda | Modified on Thursday, February 2, 2023

IPO and Grey Market Premium in India
  • GMP co-existed ever since the primary market gets momentum from the 1980s.
  • GMP is an unofficial market with no regulation and hence very risky.
  • This barometer is not at all the point for considering investments in IPOs.
  • Vested interest parties are at the center stage.

History of IPO Grey Markets

Since the primary market gained momentum in the 1980s, the unofficial grey market premium (i.e. GMP) co-existed. IPO grey market is an unofficial market with no guarantee of honoring of the trades entered into. The get market is not regulated by any authorities and hence enjoys free hand to plan the vested interest game.

To learn about how IPO Grey Market works in detail, visit:

In the old days, the GMP market was taking place at Ludhiana, Kolkata, Bhavnagar, Rajkot, Surat, Vadodara, Ahmedabad. But now the major activities are moved to places like Jaipur, Ahmedabad, Delhi and then to Rajkot, Surat, Vadodara, Bhavnagar, etc.

Although in technical terms GMP stands for Grey Market Premiums, shrewd primary market players call it Greatly Manipulated Prices. This bitter truth has surfaced many times in history so far. According to informed quarters, GMP is a game played by vested interest parties with hand in glove kind of operations.

While bigger activities are marked in GMP for mainboard IPOs, even SME IPOs too witnessed 'subject to' quotes and koshtak. The moment IPO announcements are made, the common question starts round in the market - what is GMP?

IPO Grey Market and its Impact on IPO

  • Around 60% of investors take part in the IPO for listing gains only. Very few apply for long term investment.
  • These days, GMP plays an important role in an investor's decision to apply for IPO shares.
  • Based on GMP movements, HNI category of investors look for funding options and calculate likely returns on their investment. This category is instrumental in listing the performance of any IPO.
  • Most retail investors follow HNI investors while making the decision to invest in IPO.
  • So far SEBI, the market regulators, has not taken a single action against IPO grey market operators.
  • The activities in the IPO grey market is increasing constantly over the last few years.


SBI Bank announced the SBI Card IPO in late 2019. This IPO opened on Mar 2, 2020, and closed on Mar 5, 2020.

SBI Card IPO is proved to be a huge trap laid by the vested interest parties that were operational on this counter ever since DRHP was filed. Few facts:

  • It was surprising to see that without the formal announcement of Price Band, Lot size, date of opening of IPO trades started in GMP for this proposed IPO.
  • The premium that was started with Rs. 100 touched the high of Rs. 320 just before the IPO opened and then by the time allotments announced, there were discounts in GMP.
  • In the intervening period of the SEBI DRHP review process, the rumors of the issue getting postponed beyond March 2020 started making rounds that kept a trigger on its GMP that marked wild swing both sides.
  • Even at a stage, premium market operators stated that if the IPO gets delayed beyond the second week of March 2020, all GMP transactions will be turned null and void.
  • This played a spoilsport and we have witnessed the GMP quote sliding on an hourly basis with reports of very thin volume.

Just before SBI Card, similar trends were witnessed for the IPO of CSB Bank; Ujjivan Small Finance Bank with GMP quotes much before the formal IPO details announcements. This indicated that the vested interest parties did have firm info on price bands etc for these IPOs.

Advice to Investors

  • IPO investment is not for short term gain.

    Chairman of HDFC Ltd. Mr. Deepak Parekh once said

    Primary market is always meant for long term investments. Those who are investing for listing or short term gains, they have much larger options in the form of a secondary market where they can do intraday trading, BTST or other modes of trades to make short term gains. A primary market is a place for investors with risk appetite.

  • Investor has to study the offer documents, techno-fundamental details of the corporate before considering an investment.
  • Irrespective of the higher IPO GMP at the time of public issue open for bidding, the risk in IPO investment remains higheras a lot of things can change between the IPO closing day and listing day.

For more detail about IPO Grey Market, visit:

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