What is GMP? The IPO Grey Market Premium, Explained Properly
Open any Indian IPO discussion in June 2026 and one number dominates: the GMP. "Horizon Reclaim GMP is Rs 53!" — "Hexagon's GMP has faded to Rs 4." Everyone quotes it, most people trade on it, and surprisingly few can explain where the number actually comes from. This guide explains what grey market premium is, who sets it, how kostak and subject-to-sauda deals work, what the evidence says about GMP's reliability, and how to use it without being misled.
The definition
Grey Market Premium (GMP) is the extra amount, per share, that buyers in the unofficial "grey market" are willing to pay for IPO shares before those shares list on the exchange. If an IPO's upper price band is Rs 103 and its GMP is Rs 53, grey-market buyers are effectively paying Rs 156 per share today for stock that does not officially trade yet. The implied arithmetic everyone quotes is:
Estimated listing price ≈ upper price band + GMP. So GMP ÷ upper band = the implied listing gain percentage.
That is exactly how the "Est. Gain" column on our IPO GMP Today page is computed — Horizon Reclaim (India)'s Rs 53 GMP on a Rs 103 band implies roughly 51% — and it is also where the trouble starts, because an implied price is not a promised price.
Who actually sets the GMP?
There is no grey-market exchange, order book or clearing house. The market is a loose network of dealers and brokers — historically concentrated in cities like Ahmedabad, Rajkot, Mumbai and Jaipur — who match buyers and sellers over phone calls and chat groups. Prices move the way any dealer market moves: when applications are flooding in and buyers chase limited expected allotments, dealers mark the premium up; when subscription disappoints or the broader market wobbles, they mark it down. Settlement happens after listing, in cash or by transferring the allotted shares, and the entire arrangement runs on the dealer network's trust — there is no exchange protection, no margin system and no recourse if a counterparty defaults.
Because the market is informal, there is also no single "official" GMP. Different trackers poll different dealers at different times, which is why two sites can quote slightly different numbers for the same IPO on the same evening. Our figures state their source and timestamp — see the data note on the GMP page — and we mark a GMP as "not yet active" (the way Turtlemint's was before its price band) rather than printing a guess.
GMP, kostak, subject-to-sauda: the three grey-market deals
- GMP (per-share deal). The buyer agrees to buy your allotted shares at issue price + GMP. If you are allotted, you deliver the shares (or settle the price difference in cash) after listing. If you are not allotted, the deal simply dissolves.
- Kostak (per-application deal). The buyer pays you a fixed amount — say Rs 500 — for your entire IPO application, whether or not it wins allotment. You keep the kostak money in every scenario; the buyer keeps whatever profit (or loss) the application eventually produces. Kostak is effectively selling your lottery ticket.
- Subject-to-sauda (conditional deal). A larger fixed payment — often several thousand rupees — but paid only if your application is allotted. No allotment, no payment. The rate sits between kostak and the full GMP value because the buyer is taking allotment risk off you only partially.
All three are private, unregulated bets between strangers. We report GMP as a sentiment indicator; we neither facilitate nor recommend grey-market dealing itself.
How reliable is GMP? The honest answer
Mixed — and the June 2026 tape on our own tracker makes the point better than any theory:
- GMP can undershoot. CMR Green Technologies carried a pre-listing GMP of about Rs 67 on its Rs 192 band (~35%). It listed at Rs 275.40 on BSE — up 43.44%, comfortably beating the grey market's estimate after a 127x subscription.
- GMP swings within a single issue. Hexagon Nutrition's GMP ranged from Rs 3.5 to Rs 13 during its own five-day issue window before settling near Rs 4 — anyone "locking in" the day-two number was reading noise as signal.
- GMP can simply fade. GenXAI Analytics closed its SME issue with healthy interest, yet its GMP drifted down to Rs 3 (about 2.6%) while awaiting listing — enthusiasm leaks out of thin markets quickly.
- Thin markets are movable markets. An SME issue with a Rs 35–70 crore size has a grey market small enough that a determined handful of trades can push the quoted premium — a fact SEBI has repeatedly warned retail investors about in the SME segment.
Academic-style backtests of Indian GMP data generally find a positive correlation between final pre-listing GMP and actual listing gains — direction is informative — but with wide dispersion on magnitude, and the correlation is weakest for small issues. Translation: a strongly positive GMP usually does mean a positive debut is more likely, but the size of the number deserves little faith, and a manipulated or stale GMP deserves none.
Live GMP right now
Here is the current board, straight from our data feed:
Data as of: —. GMP is unofficial and volatile; "Est. Gain" is GMP as a percentage of the upper band, not a prediction.
How to use GMP sensibly
- Use it as a thermometer, not a forecast. GMP tells you how hot demand is today. It does not tell you what the stock is worth — for that, read the red herring prospectus: business model, reason for the raise, promoter selling, valuation against listed peers.
- Watch the trend, not the level. A GMP that holds or builds through the issue window (with subscription numbers confirming it) is a stronger signal than one spectacular print on day one.
- Discount SME GMPs heavily. The smaller the issue, the easier the quote is to move, and the bigger your minimum application (Rs 2.4–2.7 lakh on current SME lots). See SME vs Mainboard IPOs for why the segment needs extra care.
- Never pay for "confirmed GMP tips". Anyone selling certainty about an unregulated, unobservable market is selling exactly that — certainty that does not exist.
- Make the decision sequence: business first, valuation second, GMP last. If the first two fail, a high GMP is a reason for caution, not comfort.
FAQs about GMP
Is the IPO grey market legal in India?
The grey market is an unofficial, unregulated over-the-counter market. Trading in it is not protected by SEBI or the exchanges — deals rest entirely on trust between counterparties, with no legal recourse if one side defaults. Quoting or reading GMP as information is commonplace and lawful; actually dealing in the grey market carries real counterparty and regulatory risk, and we do not facilitate or recommend it.
Does a high GMP mean confirmed listing gains?
No. GMP is a sentiment snapshot, not a contract. Listings beat GMP and miss it routinely — CMR Green Technologies listed 43.44% up in June 2026 against a roughly 35% pre-listing GMP, while many issues elsewhere have listed below what their GMP implied. Hexagon Nutrition's GMP itself swung between Rs 3.5 and Rs 13 during its own issue week.
What is the difference between GMP, kostak and subject-to-sauda?
GMP is the per-share premium quoted for IPO shares before listing. Kostak is a fixed price paid for an entire IPO application regardless of whether it wins allotment. Subject-to-sauda (subject to allotment) pays a larger fixed amount, but only if the application is actually allotted. All three are unofficial deals with no exchange protection.
Why does GMP change every day?
GMP reacts to subscription numbers as they build, anchor investor lists, broader market moves and plain speculative flow. Thin grey markets — especially for small SME issues — can be moved by a handful of trades, which is why day-to-day GMP swings should be read loosely, not precisely.
Should I apply for an IPO only because its GMP is high?
No. Treat GMP as one input alongside the business itself: what the company does, why it is raising money, valuation against listed peers, and promoter quality from the red herring prospectus. A high GMP on a weak business is a speculative signal, not a fundamental one — and SME GMPs in particular are easy to influence.
Next steps: check today's live GMP board, see what's opening next on the IPO Calendar, or learn the mechanics in How to Apply for an IPO and IPO Allotment Tips.