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Friends, if you are trading in the stock market, you may have heard many times about GMP. The full form of GMP – Gray Market Premium.
New investors in the stock market get confused about GMP. When a company brings its IPO into the Share Market, we read about GMP IPO Price Up-down news in various newspapers.
GMP prices are more or less the same, which new investors are always excited to know the fact.
Some people think that there is some illegal activity going on in the stock market.So it is called gray market.
Many traders define GMP in their own way or own think.
Today we will see more information about GMP IPO in this article.You can use it to increase your money by investing in the choose right ipo.
From the GMP price you can estimate how much price the stock will be listed on the stock exchange?
Gray Market Premium (GMP)
There are many colors in the world.Each color is used as a indicators.Gray is used to indicate that it would be wrong to use too much.
Basically it’s not like that.Even in the stock market, gray does not mean illegal work.
Trading in the stock market has been completely online and secure for the past several years.SEBI (Stock Exchange Board of India) applies a number of rules when buying and selling every stock.
Full form of IPO is Initial public offer.
An IPO is a company that registers on the stock Exchange to expand its current business.
- The terms and conditions of SEBI have to be accepted the IPO company which is going to register on stock exchange.
- Before registering, the company announces its IPO in the stock market.
- In three day any investor can buy an IPO.
- Applications for IPO are not accepted after these three days.
- IPO Allotment is done after 7 days.
- Those who have allot stocks then are credited to their demat account.
- Those who not allot the stock , refunded if the stock is not allot.
Where is GMP used?
When we apply for an IPO purchase.
This IPO application is in Review for 7 days.
GMP operates during the period from IPO to stock listing.
This means that these days you can buy or sell your IPO application or stock.
This buying and selling is done illegally. That means no one has control over it.
How does the gray market work? Let us understand this with an example.
- There is a company called SagaCrush. This company needs a lot of funds to expand its current business.
- This fund is to be made by public without taking it from the bank loan.
- For this, the company has to be listed on the stock exchange.
- SagaCrush announces IPO for listing.
- Rs 100 / share and one lot of 195 stock.
The IPO was bought by investor.SagaCrush sold the IPO to another company before it was listed on the stock exchange.
The issue price of the stock was Rs. 100 / share.But with the premium selling at Rs 20 in the gray market, one can guess why SagaCrush will be priced at Rs 120 when listed on the stock exchange.
Kostak rate – The IPO stock you buy is sold in the gray market before it is listed on the exchange. In the gray market, the price of an IPO is called the kostak rate.
If you sell your 5 IPO applications to someone, but you have been allotted only 2 IPO applications, you still get full profit.
The profit you will get on the IPO application has to be paid to the IPO buyer.
There are two options for trading before a company is listed on the Stock Exchange.
- Buying and selling IPO shares in the gray market.
- IPO applications can also buy and sell.
Gray market transactions are completely unofficial.These exchanges are included in short term capital.Short term transactions are taxable.
Friends, we hope you have found the information you need about Gray Market Premium (GMP).
Let us know in the comments if you have any queries.
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