Strong IPO gains stoke FOMO fears, set grey market abuzz

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Higher grey market premiums-the additional price that investors are willing to pay over the IPO price in the grey market before a stock lists-signal rising expectations of better listing gains for mainboard initial public offerings (IPOs).

For instance, Behari Lal Engineering's GMP is trading at nearly 44%, or ₹125 a share, above its issue price of ₹285, following 118 times subscription to its IPO. Shiprocket Ltd's GMP is around 38%, or ₹39 a share, above its issue price of ₹97, after the IPO was subscribed around 99 times. Both stocks are scheduled to list on August 19. Investor appetite in the unregulated grey market has also extended to IPOs that are currently open or yet to be launched.

Lalithaa Jewellery Mart's GMP is currently around 17% above its issue price of ₹201 a share. The IPO opened on August 17 and is scheduled to close on August 19, with the stock expected to list on August 24. The issue had received over 3x subscription by the end of its second day.

Sunshine Pictures' GMP is around 21% above its issue price, while Skyways Air Services is commanding a 24%, or ₹33, premium over the upper end of its ₹138 price band. Tempsens Instruments India, whose IPO opens on August 20, has a GMP of around ₹168, or 56%, above its ₹300 issue price.

The GMPs of some of the upcoming IPOs, Gaja Alternative Asset Management, Shankesh Jewellers and Horizon Industrial Parks are relatively muted.

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Abhishek Ginodia, director at Altius Investech, said GMP is largely a function of IPO pricing.

"Issues priced expensively earlier this year saw muted GMPs and modest listing gains. Over the last month, though, companies have been pricing more conservatively to drive stronger subscriptions, which in turn has pushed GMPs and listing-day pops."

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