By ipomarket.in Editorial Team · Last reviewed: 2026-10-25
Disclaimer: This article is for informational purposes only and does not constitute investment advice. IPO investments are subject to market risks. Please read the offer document carefully and consult a SEBI-registered investment advisor before investing.
Ask most retail investors what they check before an IPO lists, and the answer is usually one thing: the grey market premium, or GMP. A high GMP feels like a confirmation that the stock will open with a profit. But the market keeps producing examples where that confirmation turned out to be wrong, sometimes badly so.
This article looks at what GMP actually measures, the documented cases where high GMP preceded a flat or discounted listing, and the structural reasons the number can mislead you.
What GMP Actually Measures
GMP is the difference between the price at which IPO shares are trading in the grey market and the IPO issue price. The expected listing price is then estimated as the issue price plus the GMP . So if a share is issued at ₹500 and the grey market quotes a ₹50 premium, the implied listing is around ₹550.
The grey market itself is an unofficial, over-the-counter market where investors trade IPO shares before they are officially listed on the NSE and BSE, through brokers and dealers with no exchange regulation as there is no SEBI oversight here. The premium is self-reported by a small, informal network of operators, which makes it susceptible to manipulation .
That is the first thing worth internalising. GMP provides an informational sentiment estimate only. It does not forecast or guarantee the actual listing price, which depends on regulated supply and demand on the exchange on listing day . For a fuller primer, see our guide to what IPO GMP is and how it works.
The Cases Where High GMP Failed
Historical IPO data reportedly shows numerous instances where a high GMP preceded a flat or negative listing, and conversely, cases where flat or even negative GMP preceded a strong debut .Two recent examples make the point clearly.
Bonfiglioli Transmissions. The stock debuted on 23 October 2026 at ₹586 per share with a 0% listing premium, defying an 11% GMP signal. That GMP worked out to roughly ₹66 per share, or an indicative price of around ₹652 .Investors reading the grey market would have expected a double-digit pop. They got nothing.
Lenskart Solutions. In late 2025, Lenskart reportedly reached a high GMP of ₹55 to ₹120. Then the premium dropped to zero before listing, and the IPO opened at a discount of 1.7% to 3% . A GMP that high collapsing entirely before the debut is exactly the kind of swing that catches retail investors off guard.
More troubling are the manipulation cases. Some IPOs reportedly carried a GMP of ₹200 or more in the final two days, then listed flat or at a discount because dealer cartels were propping up the number to offload their own applications . The logic is simple: operators holding large positions in an IPO have an incentive to quote a high GMP to attract more buyers . When enough retail money has been drawn in, the premium can evaporate.
Why The Signal Breaks Down
Several structural forces pull GMP away from the actual listing price.
Leverage and listing-day selling
Much of the Non-Institutional Investor (NII) oversubscription in Indian IPOs is reportedly driven by borrowed money. These leveraged investors tend to sell quickly on listing day to repay their loans, and that wave of selling can depress the listing price even when GMP was high . You can read more about how these categories behave in our explainer on QIB, NII and retail subscription.
A thin, distortable market
Because grey market trades are unofficial and unrecorded, only a small group of participants may be involved. A handful of operators can push the GMP up or down, distorting the signal . GMP also often swings wildly near listing due to changing market conditions, new company information, general volatility, and how large institutional investors choose to act .
Broader market mood
Overall stock market sentiment and broader conditions on listing day play a huge role in whether an IPO lists at, above, or below its GMP-implied price . GMP is reportedly more accurate in stable markets, less so during volatile phases, and weakest in the days right after major macroeconomic announcements.
So Is GMP Useless?
No, but it needs context. For mainboard IPOs in 2024 and 2025, GMP on the morning of listing reportedly predicted the listing price within a 15% range about two-thirds of the time . That is a meaningful hit rate, but it also means it was materially off roughly one time in three, and a 15% band is wide enough to flip a position from profit to loss.
Low GMP is even less reliable. When GMP sits below 5%, outcomes are reportedly mixed: some IPOs list at a mild profit, some flat, some even at a discount, making a low premium an unpredictable signal rather than a clear negative .
There is no shortage of IPOs to apply this scepticism to. In 2024 alone, India had 327 IPOs raising approximately $19.9 billion, accounting for nearly 30% of all global IPO listings that year .With that volume, the temptation to lean entirely on a single grey market number is strong, and so is the risk of being wrong.
The Risks Beyond The Signal
It is also worth remembering that grey market transactions occur outside regulated exchanges, with no formal contracts, stamp duty, or escrow protection, leaving both parties exposed to counterparty risk .The grey market is not a venue retail investors can safely transact in, and the premium it produces is a byproduct, not a guarantee.
Regulators are aware of the gap. Former SEBI Chairperson Madhabi Puri Buch reportedly announced in early 2025 that the regulator was exploring a 'when-listed' platform, an official, regulated pre-listing trading mechanism . If it materialises, it could eventually offer a transparent alternative to the grey market, though nothing about its timeline or structure is confirmed.
For investors who want to replace guesswork with a structured approach, our pieces on how accurate GMP data is and GMP versus actual listing gains using 2025 data go deeper into the numbers.
FAQ
Does a high GMP guarantee an IPO will list at a profit?
No. GMP provides a sentiment estimate only and does not forecast or guarantee the listing price, which is set by regulated supply and demand on the exchange. Documented cases, such as Bonfiglioli Transmissions listing flat at ₹586 against an 11% GMP signal and Lenskart Solutions opening at a 1.7% to 3% discount after a GMP of ₹55 to ₹120, show the premium can collapse before listing.
How accurate has GMP been historically?
For mainboard IPOs in 2024 and 2025, GMP on the morning of listing reportedly predicted the listing price within a 15% range about two-thirds of the time. That leaves a significant share of cases where it was materially off, and a 15% band is wide enough to turn an expected gain into a loss.
Why does GMP sometimes drop to zero before listing?
Several reasons are reported: dealer cartels propping up the number to offload their own applications, leveraged NII investors preparing to sell on listing day, a thin market where a few operators move the price, and shifts in overall market sentiment. GMP often swings sharply in the final days before a debut.
Is trading in the grey market safe for retail investors?
Grey market transactions happen outside regulated exchanges with no formal contracts, stamp duty, or escrow protection. Both parties carry counterparty risk. It is an unregulated, informal market, and the premium it produces should be treated as an indicator to interpret with caution, not a venue to transact in.
Is GMP more reliable in some conditions than others?
Reportedly yes. GMP is said to be more accurate in stable markets, less so during volatile phases, and weakest in the days right after major macroeconomic announcements. Broader market mood on listing day heavily influences whether an IPO opens above or below its GMP-implied price.
Last reviewed: 2026-10-25 by the ipomarket.in Editorial Team.