What is grey market and GMP that led to Tata Tech IPO opening at 140% | Mint
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Business News/ Markets / Ipo/  What is grey market and GMP that led to Tata Tech IPO opening at 140%
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What is grey market and GMP that led to Tata Tech IPO opening at 140%

Grey market trading allows investors to get a sneak peek into the potential of companies before their official IPO debut, but comes with complexities and risks.

Car Trade IPO: Grey market is indicating that the public issue will have moderate to reasonable listing, said market observers. (Reuters)Premium
Car Trade IPO: Grey market is indicating that the public issue will have moderate to reasonable listing, said market observers. (Reuters)

With initial public offering (IPO) market is creating a buzz with new IPOs marking their debut. The IPO debutants include Tata Technologies, IREDA, Flair Writing Industries and Gandhar Oil Refinery. Soon after the launch of their issues, there is a frenzy around the grey market and the grey market (GMP). Livemint explains what these terms mean and how it works.

On the NSE, Tata Technologies' share price today was listed at 1,200 per share, 140 per cent higher than the issue price of 500, and on the BSE, Tata Technologies shares were listed at 1,199.95 apiece. The spike in share prices was also attributed to grey market trading, analysts said, Livemint earlier reported.

What is the Grey Market?

Equities before their listing on exchanges like NSE and BSE are traded unofficially and unregulated through the grey market. However, these unregulated transactions are not considered illegal. "In the dynamic landscape of finance, the grey market stands as a unique and intriguing space where investors can get a sneak peek into the potential of companies before they officially debut on stock exchanges through Initial Public Offerings (IPOs)," explained Prashant Tiwari, an NSE certified Sub-broker at Motilal Oswal.

What is the benefit of trading on the grey market?

"This unofficial market, while holding the promise of early entry opportunities, is not without its complexities and risks. In this comprehensive guide, we delve into the intricacies of trading on the grey market and shed light on the associated risks that investors should be mindful of," explained Tiwari.

What is Grey Market Premium (GMP)?

Grey Market Premium is the surplus amount that a trader is supposed to pay in addition to the IPO's actual price on the grey market before its listing. "Grey market prices are influenced by investor sentiment rather than concrete financial metrics, leading to potential market inefficiencies that require a nuanced understanding of market dynamics," explained Tiwari.

What are the risks involved in grey market trading?

Grey market prices are influenced by investor sentiment rather than concrete financial metrics, leading to potential market inefficiencies that require a nuanced understanding of market dynamics, according to Tiwari.

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Published: 30 Nov 2023, 04:09 PM IST
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