The grey market premium, usually shortened to GMP, is the extra price at which an IPO share is quoted in the unofficial grey market before it lists, shown as a premium over the issue price. Dealers in this market trade the right to receive shares, and their quotes reflect how much demand they expect on listing day. GMP is not regulated, not reported to any exchange and not guaranteed, so it can change several times a day and can fall to zero or turn into a discount without warning. It is a mood indicator, not a price forecast. A high premium often signals strong demand, but many issues with big premiums have still listed flat, and some with no premium have listed well. We always label GMP as unofficial and never treat it as a promise of listing gains. Use it only as one signal alongside subscription numbers, the company financials, the valuation and the overall market condition. Never borrow money to apply for an IPO because of a GMP figure.
Example: If an issue is priced at Rs 100 and the GMP is Rs 18, the grey market suggests a listing near Rs 118, an 18% premium. Nothing obliges the stock to open there, and a weak debut can erase the premium completely.