Demystifying Grey Market Premium (GMP): How IPO Traders Gauge Listing Day Sentiment
Learn how the unofficial grey market functions in India, what Kostak and Subject to Sauda mean, and why GMP must be treated as sentiment rather than guaranteed listing profit.
Abhishek Chaubey
What is Grey Market Premium (GMP)?
The Grey Market Premium (GMP) is an over-the-counter, unregulated indicator of price expectation for an upcoming IPO before its official listing on the BSE and NSE. Traders and dealers exchange application forms and rights at a negotiated premium based strictly on anticipated retail and institutional demand.
Kostak vs Subject to Sauda
In grey market jargon, Kostak refers to the fixed premium earned by selling an IPO application before allotment, irrespective of whether shares are allotted. Subject to Sauda, on the other hand, only pays out if shares are successfully allotted to the applicant.
Why GMP Is Not a Guarantee
While a high GMP frequently correlates with strong listing day pops, it represents unofficial dealer sentiment and remains highly volatile. Broader market corrections or macroeconomic shocks on listing morning can quickly erase grey market gains. Always evaluate company financial fundamentals and anchor quality first.
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