How is GMP related to Listing Price?

The GMP gives a reasonable impression of investor sentiment for the IPO. It is determined by the demand and supply dynamics for the IPO.

An IPO that is in high demand and widely subscribed by investors will usually trade with a high GMP. A high GMP indicates that a large number of investors are interested in the IPO and therefore a high premium can be expected.

In November 2023, Tata Technologies offered its IPO at a price of Rs 500 per share and in the grey market, the stock was trading at a premium of almost 95% i.e. GMP is 475 rupees. At the given GMP, the stock was expected to trade at (Rs 500 + Rs 475) Rs 975 whereas it was actually listed at Rs 1200.The GMP is not a 100% indicator of the listing price, but it is a good indicator of the demand for the IPO and gives a good idea of the listing price.