What is Grey Market Premium ?

IPO market is running at a high today. The NSE and BSE IPO grey market premium has an important role in determining the subscription status. Moreover, the important question is where is grey market premium in India? It is all over India. Grey market premium determines the interest level of investors in an IPO. If the premium is high, more investors will apply for IPO. On the other hand, if the premium is low or negative, fewer investors will apply for the IPO.

Let us understand the grey market premium meaning.

Meaning of Grey Market Premium

The grey market premium is an over the counter market or unofficial market. Here the new shares or the shares of the company bringing the IPO are bought and sold even before their listing on any of the exchange. In fact, grey market premium helps in price discovery of a stock. Furthermore, the premium can be negative and positive depending on the demand and supply of shares.

Let us take an example to understand the concept of the grey market premium for smart investors.

{ Read : How to Invest In IPO }

Example of Grey Market Premium

Here, we will take two different situations.

  • Suppose the issue price of Reliance Nippon is Rs.250. Grey market premium of Reliance Nippon is Rs.50. In the given situation, the premium is positive. Because of positive premium, the buyers are ready to purchase the shares of Reliance Nippon at Rs. 250 + Rs. 50 = Rs. 300
  • Suppose, in this situation the grey market premium of Reliance Nippon is Rs. -20. The issue price is Rs. 250.  Since the grey market premium here is negative, it means that the sellers are ready to sell the shares at a discount of Rs. 20 i.e. Rs. 250 – Rs. 20 = Rs. 230

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The changes in the premium price keep on happening. Until the shares are listed for trading on the exchange, action in grey market premium price continues. In addition, an investor can also take the delivery of shares by purchasing the shares of the IPO company on the listing day.

Latest IPO Grey Market Premium 

Meanwhile, apart from grey market premium, there is another concept that is very popular for IPOs. It is Kostak. Let us understand what does Kostak means.

Meaning of Kostak

Kostak is the price of the IPO application in the grey market. The Kostak rates vary for different IPOs. To put it another way, Kostak rate is the premium price a seller gets by selling his IPO application to someone else even before the allotment or listing of the issue. It is an off the market transaction.

{ Read : Golden Tips for Investing In IPO }

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A smart investor always looks for opportunities to invest his money. The easiest way to make money today is IPO application. We at Nifty Trading Academy provide informative blogs and articles on stock markets. With us, the investors can learn about IPOs and concept of grey market premium in India. This helps them in taking a prudent decision while applying for an IPO. Similarly, we also keep updating our blogs and articles. One can learn about different concepts and terms of the stock markets by reading our material. In the stock market, the saying, “Knowledge is Wealth” holds very true. Therefore, visit our blogs and articles to enhance not only your knowledge but your wealth as well.

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