Grey Market Premiums Are Misleading Investors. India’s IPO Boom Is Exposing a Broken Signal

Mumbai | November 14 – For years, India’s grey market premium (GMP) has acted as an unofficial barometer for predicting IPO listing performance, with retail investors treating every spike as a guarantee of listing gains. But the latest cycle of public-market debuts has revealed an uncomfortable truth: GMPs are becoming increasingly unreliable, volatile, and disconnected from real demand.

What once served as a rough sentiment indicator has now turned into a misinformation signal, distorting investor expectations in one of India’s hottest IPO markets.

Record IPO Subscriptions, Weak Listings: How Grey Market Premiums Are Failing Across the Board

The widening gap between GMP chatter and actual listing outcomes is now impossible to ignore.

LG Electronics India set off a frenzy with a 54× subscription and a listing gain exceeding 50%, far ahead of its already optimistic GMP. Groww surprised even more—the IPO had a muted GMP of ₹3 per share but debuted with a 12% jump, eventually closing 31% higher on day one.

But the euphoria didn’t hold.

Several hyped IPOs with strong subscription and healthy GMPs failed to deliver:

• NSDL, Orkla India, and Tata Capital all listed sharply below grey-market expectations
• Tata Capital’s GMP hinted at a 6–7% gain; the stock opened with just a 1.2% premium
• Lenskart Solutions and Studds Accessories, despite elevated GMPs, listed below issue price, exposing the gulf between grey-market pricing and institutional appetite

The message is unmistakable: GMP has lost predictive power.

Why GMP Is Becoming Misleading in Today’s Market

1. It reflects sentiment-not real demand GMP comes from an unofficial, unregulated micro-market, dominated by a handful of dealers where trades lack transparency. A few large orders or strategic players can distort the premium.
2. GMP is not connected to institutional order books Actual listing prices depend on QIB and anchor investor behaviour, not grey-market speculation. GMP traders rarely have visibility into institutional demand.
3. Leverage-driven HNI bids inflate subscription, not valuation Oversubscription numbers look impressive – but much comes from leveraged bets, not genuine long-term interest. High subscription boosts GMP, but doesn’t lead to real buying on listing day.
4. IPO pricing is aggressive, leaving little upside Companies benchmarking themselves to peak valuations leave no headroom for the stock to appreciate at listing – turning GMP hopes into disappointment.
5. Real price discovery happens on the exchange, not the grey market Pre-open auctions, institutional orders, and market sentiment on listing day determine the actual price — not informal backroom trades.

In short:
The grey market is still noisy. But the market has grown up.

What Investors Should Focus on Instead

As the IPO market matures, GMP is losing relevance, while real indicators regain importance:

• Anchor investor quality
• Domestic mutual fund participation
• Institutional QIB book
• Valuation relative to peers
• Promoter dilution and corporate governance
• Broader market risk appetite

A high GMP can no longer be assumed to reflect sustainable demand.

Conclusion: The IPO Boom Is Real –  But has GMP lost it’s relevance ?

India is witnessing one of its strongest IPO cycles, marked by heavy retail participation, marquee listings, and a crowded primary market. But the same environment has exposed how grey market premiums increasingly mislead investors, creating unrealistic expectations and distorting risk perception.

The bottom line:
GMP is speculation, not a forecast.
In today’s market, fundamentals-not grey market noise- determine listing outcomes.