The IPO Grey Market is an over-the-counter market where dealers may execute orders for preferred customers as well as provide support for a new issue before it is actually issued. (investopedia).
Grey markets (Grey Market or GMP) work in two ways in India. It decide the premium of an IPO which is not yet listed in Stock Exchange and it also allows investors to sell their application or allocated stocks at certain premium before they list.
The grey market involves unofficial buying and selling of shares a few days before the actual listing of the IPO on the stock exchanges. Rates here are often seen as an indicator of market expectations from the IPO.
Warning:
1) Do not subscribe to any IPO's on the basis of grey market price or IPO Forecast. Please check the fundamentals of the company before applying. Use grey market price as an informational tool.
2) However, experts warn that the premium that issues in these unregulated trades enjoy can be easily subject to manipulation. Since many investors take their cues from the grey market premium that shares of an issue command, there is often an effort to drum up interest in order to attract greater interest in the issue. Post the issue, grey market demand and the premium often disappear.
3) Grey market premiums don’t guarantee listing-day gains, so investors would be advised to study the track record of promoters and merchant bankers of the issue
