What is gray market in Hindi: friends if you stock marketIf you invest in IPO etc. then you must have heard about the Gray Market Premium of IPO at some point of time. But very few of you would know That IPO In Gray Market Premium what is, How does the gray premium market workIPO GMP How is it calculated and what are its advantages and disadvantages.
If you want to learn and understand the stock market well, then you have to understand each and every term of it very well. Gray market premium is also an important term associated with it. Although it is not official, but big investors prefer trading in the gray market.
If you read this article till the end, then you will get complete information about IPO gray market premium and then you will not need to go to any other blog for this information.
So friends, without taking much of your time, let’s start today’s article and know more – IPO What is gray market premium in detail in Hindi?
What is Gray Market Premium in IPO?
IPO In Gray Market Premium, which is called GMP in short form, it is a premium amount at which gray market IPO shares are traded before getting listed on the stock exchange.
Any company first issues an IPO to get listed in the stock market, only after that it gets listed in the stock market. Investors buy and sell the company’s shares in the primary or secondary market only after issuing the IPO.
But when the shares of the company bringing IPO are bought and sold outside the stock market, it is called gray market and the amount that the investor has to pay over the issue price of the share is called gray market premium.
For example, suppose the IPO of a company has been issued at Rs 100 per share and the GMP (grey market premium) of this share is running at Rs 20, then the investor has to buy a share from the gray market. share You will have to pay Rs.120 to buy it. GMP refers to how an IPO responds on the day of listing.
Though GMP is not reliable but in most of the cases GMP works properly and IPO gets listed around given price.
What is gray market?
You must be aware that officially the shares of any company are traded in the primary and secondary market. Shares issued in IPO are traded in the primary market and stock exchange Shares are traded in the secondary market.
But the shares are traded in the gray market before being traded in the primary market and secondary market, here the word gray indicates unofficial. As the regulator of primary and secondary market SEBI It happens but there is no one regulator of the gray market. This is an illegal market, so credibility is also less in it.
How does GMP work?
As you must have understood by reading the article till now, gray market is unofficial where shares are bought and sold before being listed in the stock market.
Let us now know how the gray market works.
- First of all, investors apply for shares of a company through IPO. Here investors take a financial risk. The first is that either they may not be allotted any shares or they may receive shares but the shares may be listed below the issue price. Such investors are called Sellers.
- Apart from these, there are some people who think that the share price is more than its issue price and the shares will be listed at a good price. That’s why they buy these shares from the dealer even before the IPO allotment. Such investors are called Buyers.
- Buyers contact the gray market dealer and place an order to buy IPO shares at a certain premium.
- After this the dealer contacts the sellers and asks them if they want to sell the shares at a certain premium at this time. The dealer offers the premium that was given to him by the buyers.
- If Sellers is not ready to take the risk of stock exchange listing and they prefer premium then they sell IPO to Sellers market dealer.
- Now the gray market dealer receives the application details from the sellers and sends a notification to the buyer that he has bought a certain number of shares from the sellers in the gray market.
- After the allotment is complete, the seller may or may not receive the share allotment. If the share allotment does not happen then the deal between the buyer and the seller gets canceled.
- If the shares are alloted to the investor, then the buyer asks the seller to sell the shares at a fixed price through the dealer, or the dealer can also transfer the shares to a Demat Account.
- Finally, after the shares are sold, the gray market dealer settles both the parties.
So this is how gray market premium works. Here the shares are made on the trust of the seller dealer, if any party reneges on its promise then no legal action is taken on it.
How is GMP calculated?
The GMP of any IPO never remains constant, it keeps on changing till the listing is done. GMP is calculated on the basis of demand of share in the market. If the demand of the share is high in the market and its supply is less then the GMP is always high and if the demand of the share is less in the market and its supply is high then its GMP is also low.
What is bracket rate?
The bracket rate is the amount that the investor pays for the IPO application before the IPO listing. If an investor applies for IPO but does not want to take risk by buying shares in IPO, then he can earn profit by selling his application in gray market at bracket rate.
Advantages of IPO Gray Market
There are many advantages of IPO gray market such as –
- Investors can earn more profits by estimating the listing before the listing of IPO of the company through IPO gray market.
- All those securities which are listed on the stock exchange trading There are suspensions from them, they get a chance to trade in the gray market.
- This market provides issuers and investors with estimated stock price and valuation figures before they go public.
- The IPO gray market is a good marketplace for start-ups to decide whether to go public or not.
IPO Gray Market Disadvantages
IPO gray market also has some disadvantages such as –
- The estimation of share price on the basis of premium in IPO gray market is not always reliable.
- There is no regulator of IPO gray market, so there is more possibility of risk in it.
- No deals are written in the IPO gray market, if a party reneges on its promise then no legal action is taken on it.
FAQs: What is the Gray Market Premium in IPO?
The full form of GMP is Gray Market Premium.
Since there is no regulator of the gray market, investors can choose their Buyers / Sellers on an individual basis.
In fact, there is no official relation between the gray market and the IPO market. Gray market is an unofficial market while IPO market is officially recognized under SEBI Regulation.
Gray market is an unauthorized market and it does not have any regulator, so the activities in gray market cannot be tracked and SEBI also does not take any responsibility for the deals that happen in gray market. The gray market is operated by the mutual consent of some people. That’s why it can be said that gray market is not completely Illegal but it is not official.
read these too
Conclusion – What is Gray Market Premium in IPO in Hindi
In today’s blog post we What is IPO Me Gray Market Premium, how does Gray Market work and what are its advantages and disadvantages We have provided complete information about it and also in this article we have also given you information about the bracket rate.
We have full hope that after reading this article, you must have understood IPO GMP very well, if you have any doubt related to this article, then you can feel free to tell us in the comment box. And if you like the information given in this article, then do share it with your friends on social media.,