Is GMP a useful signal or just market noise for IPOs

…but lacks transparencyMarket experts say the GMP can provide a broad indication of sentiment in the unofficial market, but investors should be cautious about treating it as a definitive predictor of listing gains." The GMP may be considered as a ballpark number having some predictable success rate in estimating listing gains as it is derived from a subset of market participants; hence, a GMP number has a higher degree of prediction probability for listing gains ," said Narendra Solanki, Head, Fundamental Research - Investment Services, Anand Rathi Share and Stock Brokers.However, the lack of transparency around how GMP figures are arrived at remains a key limitation.On the…

…should keep this in mind whenever they wish to use GMP as their anchor basis," he said.Kranthi Bathini, Director, Equity Strategy at WealthMills Securities, also pointed to the speculative nature of the grey market." The grey market premium is completely unregulated and, by and large, there is a lot of speculative activity in the grey market. The price discovery mechanism is more speculative in nature ," Bathini said.According to Bathini, the more meaningful indicators for investors are the company's valuations and fundamentals. In the short term, he said, stock markets tend to reflect sentiment and voting behaviour,…