GMP In IPO Market. How You Can Use this in Your IPO Analysis, What Does It Tell You?
The IPO market in 2021 has been the hottest market. 60 IPO have come into the market this year. This year has seen the largest IPO listing as well as the most flopped listing of the decades. This year has also witnessed well-known companies IPO such as Paytm, Zomato, Policybazaar, Star Health. As time is passing, more people are opening the Demat account in India. This shows that people are getting more aware of the investing aspects of life. According to the thehindubusinessline 6.9 Crore, Demat accounts are opened in India. This shows people are getting more serious about investing.
GMP is a very important part of an IPO market. This is not an official market, but with the help of GMP, one can anticipate the listing of the IPO. GMP is Grey Market Premium, and Grey Market in simple words is the middle of stock after being listed on the exchange and before it is listed on the stock exchange. GMP can tell us about the listing price. When you are applying for the IPO then one thing you need to always look at is the GMP. If we have the GMP then we can add this to the stock price band and then we can have an idea about the listing price of the stock and we can understand the listing gain of that particular stock.
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Example
If a company decides the price band 80-100 rupees. That means the listing price we will consider there are 100 rupees of that particular stock. Now you need to check the GMP of that stock. How can you check the GMP please click here and read the following article for that? After you see the GMP. Note that down and then add it to the price band price. Now suppose the GMP is 20 rupees, now add this 20 to 100, total we got here is 120. This means the total gains we can expect at the time of listing on the exchange is 20 percent. You see, this is how people use GMP to calculate the gains from stock. Now you can also understand how important it actually is.
This is also said, the Grey market is the unofficial market. Grey market is not regulated under SEBI like IPO market, so you can not completely rely on the data of GMP. This has been the observation that in most cases if the GMP is high before the listing of that particular stock, then that stock usually gives good listing gains or short-term listing gain ( STLG ).
Case Study On Go Fashion ( Gocolors )
Share of Go fashion listed on the 30th November 2021. The price band of the stock was chosen between 655 to 690 rupees. The stock got listed on the 30th but before that stock grey market premium was at 500, which means the total price if we add it together was 1190. We could have guessed by looking at this about the IPO that it will do the good at listing and it id. It opened up at a 91% return today. You see guys that is how you can anticipate the listing gains in an IPO.
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What are Kostak Rates?
The explanation of the Kostak rate won't go very deep in this as this is a pure grey market term. We will just explain this in very simple words so you have an idea about it next time when you hear about it. Kostak rates are the amount an individual pays for the IPO application. Just to understand this better when you apply for the IPO you pay an amount between 14 to 15k. Just like that, an amount is paid for the IPO shares before the company share is listed in the market. That amount is called Kostake rates.
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