June 3, 2026: The IPO grey market is an unofficial, unregulated market where IPO shares and applications change hands before the stock lists on NSE or BSE. The grey market premium, or GMP, is the extra amount buyers pay there over the issue price, and retail investors treat it as an early read on listing day. It runs on trust between local brokers, mostly in Gujarat and Mumbai, with no SEBI oversight and no legal backing. And SEBI now wants to replace it with a regulated platform called when listed.
Author: Aadarsh Patel | EQMint | EQ Originals
So when you see an IPO quoted at a GMP of 80, that number came from this shadow market. Not from any exchange.
Here’s how the grey market actually works, what GMP, Kostak and subject to sauda mean and why the regulator is trying to shut the whole thing down.
What is the IPO grey market?
It’s an informal market that springs up the moment a company announces its IPO price band and dates. Buyers and sellers trade IPO applications or allotted shares at a premium or discount to the issue price, and the trading runs until the stock officially lists.
There are no exchanges here. No SEBI oversight, no legal contracts, no clearing house. Deals happen over phone calls and private messaging groups, and settlement rests entirely on the word of the broker in the middle.
Most of this activity is concentrated in a handful of cities in Gujarat and Mumbai, carried out by a small circle of dealers who have done it for years.
What is GMP and how is it calculated?
GMP stands for grey market premium. It’s the price grey market participants are willing to pay above the issue price.
The math is simple. Issue price plus GMP gives the expected listing price. If an IPO is priced at 500 and the GMP is 100, the grey market expects the stock to open around 600.
A negative GMP flips the signal. It means the grey market expects the stock to list below its issue price, which is a warning, though not a guarantee of a weak listing.
Take the GMP for what it is. An informal sentiment gauge set by a few dealers, not a forecast backed by any data you can verify.
Kostak rate and subject to sauda, explained
Two terms come up constantly in grey market chatter. Both are ways to trade an IPO application before allotment is known. They differ on who carries the risk.
Kostak rate. A fixed price paid for an entire IPO application, regardless of allotment. Say a seller applied for 7,500 worth of shares and a buyer pays 1,000 as Kostak. The seller pockets that 1,000 whether or not shares are allotted. It’s a way to lock a small, certain profit and hand the allotment uncertainty to the buyer.
Subject to sauda. A conditional deal that only triggers if the seller actually gets an allotment. No allotment, no payment, deal cancelled. The premium here is higher than Kostak because the upside is bigger, and the buyer takes on the risk of a discounted listing. The seller still gets paid even if the stock lists below the allotment price.
The trade-off is clean. Kostak gives a small guaranteed sum. Subject to sauda offers more but pays nothing if the allotment doesn’t come through.
| Kostak rate | Subject to sauda |
| Fixed price for the whole application | Conditional on allotment |
| Seller paid even with no allotment | No allotment means no payment |
| Smaller premium | Larger premium |
| Buyer carries allotment risk | Buyer carries listing-price risk |
How reliable is GMP, actually?
Take an honest position here, because the tipster channels won’t. GMP is a rough mood indicator, not a prediction.
For large mainboard IPOs with heavy institutional subscription, GMP gets the direction right (gain or loss) roughly 60% to 70% of the time. For SME IPOs, that reliability drops sharply, and for smaller issues the grey market activity may be thin or barely reported at all.
The deeper problem is that GMP is easy to push around. A handful of dealers quote the number, and a low public float plus some hype can inflate it well past what the fundamentals justify. Retail investors chasing a high GMP are often the ones left holding the stock when it fades after listing.
Once the stock lists, GMP stops mattering entirely. The NSE and BSE price becomes the only real price.
Why SEBI wants to replace the grey market
The grey market exists because of a gap in the calendar. After an IPO closes, allotment is finalised within 2 days and the stock lists on the third working day, the T+3 timeline SEBI brought in from December 2023, down from the old T+6.
Those 3 days between allotment and listing are when the grey market does its heaviest business. Investors who want to lock gains or exit early have no legal way to trade, so they turn to the off-the-books market instead.
SEBI’s answer is a regulated platform called when listed. The idea, floated by then-chairperson Madhabi Puri Buch in January 2025, is to let exchanges run a section where allottees can trade their shares in those 3 days, in the open, with prices that are visible and verifiable.
The regulator’s logic is straightforward. If investors want to trade before listing, give them a transparent place to do it instead of an opaque one. A when listed platform would show price moves as they happen rather than dumping them into a single listing-day pop, and it would make the tax on early exits far cleaner to track.
What when listed would change for retail investors
Three practical shifts, if and when it launches.
Prices become real. Instead of a GMP whispered by dealers, you’d see actual trades on a regulated venue, with the transparency that comes from exchange oversight.
Manipulation gets harder. Verifiable prices and a visible order book make it tougher for a small group to inflate sentiment the way they can in the grey market today.
Speculation does not vanish. Be honest about the limits. Much grey market activity happens before an IPO even opens, which a 3-day window would not capture. The platform is a bridge toward transparency, not a cure for hype. And as of early 2026 it remains a proposal under discussion with the exchanges, not a live product.
Should retail investors trade in the grey market?
No, and the reasons are practical, not preachy.
It’s unregulated. There’s no legal recourse if a broker walks away from a deal, because none of it is enforceable. Settlement happens in the applicant’s own account, which means the tax liability lands on the seller regardless of who really profited. SEBI itself has cautioned investors against participating.
Watching GMP as one weak signal among many is fine. Putting real money into grey market deals, on a handshake, with no protection, is a different thing entirely.
FAQ
What is the IPO grey market?
An unofficial, unregulated market where IPO applications and allotted shares are traded before the stock lists on NSE or BSE. It operates through local brokers with no SEBI oversight and no legal backing.
What does GMP mean?
GMP is the grey market premium, the amount buyers are willing to pay above the issue price. Issue price plus GMP gives the grey market’s expected listing price.
Is the IPO grey market legal?
It operates outside SEBI’s framework and trades are not legally enforceable. It is not officially sanctioned, and SEBI has cautioned investors against taking part.
What is the difference between Kostak and subject to sauda?
Kostak is a fixed price for an entire application, paid whether or not shares are allotted. Subject to sauda is conditional and only pays out if the seller actually receives an allotment.
How accurate is GMP for predicting listing gains?
For large mainboard IPOs it gets the direction right about 60% to 70% of the time. For SME IPOs reliability drops sharply. It is a sentiment gauge, not a forecast.
What is the SEBI when listed platform?
A proposed regulated venue that would let allottees trade their IPO shares in the 3 days between allotment and listing, in the open. SEBI floated it in January 2025 to curb grey market trading and improve price discovery.
Has the when listed platform launched yet?
As of early 2026 it remains a proposal under discussion between SEBI and the exchanges, not a live product.
Does a high GMP guarantee a strong listing?
No. GMP can be inflated by hype and a low public float, and it stops mattering once the stock lists. The exchange price then becomes the only real price.
EQMint is not a SEBI registered investment adviser. This article is for informational purposes only and is not investment advice.
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