What is Grey Market?
IPO Gray Market Premium or IPO GMP is an informal premium amount, which is ready to pay on the opening or listing price, which starts the IPO on the Gray Marke in Indian stock market. The complete perception is based on supply and demand.
Behind the Indian stock market, strictly controlled by the SEBI, there is an informal and illegal gray market where the price of the stock is listed and traded between different investors. On the basis of the supply, demand and capacity of the company to be listed, premium is paid in an IPO Gray Market.
In fact, this price keeps changing until the IPO listing price is opened.
India peope are showing more interest to search what is GMP today? Now let’s know what is Grey Market Premium? The price at which the trade is traded is called premium, indicating the approximate listing price.
Latest Grey Market Premium Today & Kostak Rates
(As On 5-10-2018)
|IPO Names||Price-Band||GMP Today||Kostak||Subject to Sauda|
|Garden Reach IPO GMP||155-118||0||0||0|
|Aavas Financiers GMP||818 – 821||-40 to -45||0||0|
IPO GMP – Key Factors
- Showing Premium for Mainline IPOs only.
- Showing only brokerage price as an estimated IPO GMP on upcoming IPOs in India
- It is illegal, so not buying and selling IPO forms on IPO Grey Market.
- IPO GMP in grey market has not been regulated by any Indian stock market
- Kostak rate is one kind of premium which is showing average price on IPO companies to selling his/her IPO application
- GMP & kostak rare, it will be changed daily as market condition.
What is Grey Market Premium?
This is the reason why this is a specific group of people who are fast looking for money (or even losing money). Some merchant IPOs see gray market premium as a potential indicator of the actual performance of the benchmark or IPO when it opens. This helps in the idea of whether the traders move forward with the IPO.
Another difference between the IPO Gray market and the official stock market is that you can buy or sell shares in any amount according to your choice. There is no limit on the maximum purchase, which is 15,000 in the regular IPO bid. In addition, there is no limit to the total IPO investment, which has been kept Rs 2 lakh for retail investors in the case of regular IPO bidding.
Gray Market does not have official exchange like BSE or NSE. There is a trading on the phone with mutual trust. For this, it is necessary for the operator to have a personal contact. The deal in the gray market is not guaranteed to be completed. Deals are reserved for the day of listing on NSE or BSE. Gray premium, the difference between the trading price, is in the settlement cache. There are also small retail applications in this deal.
Whats is Kostak Price/Rate in Grey Market
Kostak price or rates is a concept that is basically the monetary value of the IPO application. It is one type of traded in grey market at a specific price based on market condition. It is pre-decided to tie-up with other person on fix value.
The normal process for the stocks to be deposited in your demat account and the transactions that occur through your trading account remain the same.
After saying this, with the overabundance of various IPOs (good or bad) these days, the concept of kostak rate is a back door to enter a public issue. The main reason for this is that investors know that the possibility of actually allocating is limited, especially if the IPO is very good and can bring profits faster.
What Is Subject to Sauda?
This is a another concept of the shares of IPO allocation , it works only on when ipo allotment is done in the demat account. Actually, in this case, grey market price is much higher than the offered actual price , while the remaining procedures and details are the same.
A key aspect that you should understand is that if you take the allocated shares under the kostak price or ‘Subject to Sauda’, then the sale of these shares is going through your trading account. And for that reason, you have to pay short-term capital tax. In this way, make all the costs together by doing your math.
It is also important to know that without involving STCT, you will actually get less profit or there will be no benefit in all these trades.