Stock volatility affects grey market premium for Precision Camshafts

As the Precision Camshafts IPO opens on 27 January, activity in the grey market has started picking up in the new year. Priced in the range of INR180-186 per share, the first public issue under the T+6 rule, the IPO will mobilize over INR400 crore. Although the issue is yet to open for subscription for general public or even anchor investors, Precision Camshafts GMP rates suggests the IPO will end up rewarding investors.

In case you haven’t gone through IPO Central’s review of the IPO, here is the link:

Read Also: The good, bad, and ugly of Precision Camshafts IPO

Precision Camshafts IPO conference

Grey market is the unofficial agreement between an IPO investor and a stock broker which allows investors to lock profits before the stock lists. Even though the grey market is entirely based on trust with zero regulations, premium or discounts are often seen by high net worth and retail investors as a strong indicator of likely scenarios post listing. Under this system, shares allotted to IPO applications are sold by brokers without actually transferring the shares to their accounts. As one can guess, activity in the grey market is volatile and unstable and the premiums can quickly diminish if the broader markets correct heavily.

According to brokers in key markets such as Ahmadabad and Jaipur, Precision Camshafts GMP rates are in the range of INR15-18 per share which indicate that the stock’s listing is expected at more than INR300 INR200 per share. Grey market worked as a solid indicator in the case of Dr Lal Path Labs and Alkem Laboratories, but Precision Camshafts GMP numbers are not big and marginal at best. As noted above, these rates are subject to change and given the extreme volatility in the secondary market, grey market premiums can correct sharply from these levels.

In the coming days, Precision Camshafts’ subscription levels and allotments to anchor investors will be the prominent IPO news but it may be worthwhile to keep an eye on grey market premium as the IPO is certainly not among the most sought after. In any case, investors need not rush into buy into any specific IPO as they have the luxury of choosing from the long list of upcoming IPOs this year in India.

Stock volatility affects grey market premium for Precision Camshafts
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Anurag Gupta

With a profound experience in the finance field, Anurag also has years of experience in writing about different domains including finance and technology. He used to write for different content portals along with his association with IPO Central as a frequent contributor. His financial analyst’s background supports his writing and help him to get aware about different news’ of finance world.

8 thoughts on “Stock volatility affects grey market premium for Precision Camshafts

  • January 27, 2016 at 11:21 AM
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    what to do with precision camshafts ipo subscribe or not????

    Reply
    • January 28, 2016 at 9:40 AM
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      Hi Hardik, this is not a clear “apply” or “don’t apply” case and the eventual decision in such borderline cases rests on the risk appetite of an investor. The furor over the corporate governance could have been digested last year when the markets were doing well. I think slim grey market premiums are warning signs but actual performance has been good enough.

      Reply
  • January 25, 2016 at 4:22 PM
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    I wonder if you would really to put up my comments … or will you just ignore it in the guise of ‘moderation’

    Reply
    • January 25, 2016 at 4:38 PM
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      Your feedback is whole-heartedly accepted eagleye. There is no reason why I should restrict comments unless someone is downright abusive. I understand your frustration but please give us some time for comment moderation and replies.

      Like I mentioned earlier, I stand corrected on the listing price. As far as the grey market premium is concerned, it keeps changing pretty frequently. Just checked with my contacts and the premiums are what I mentioned. Please note, there are regional variations.

      Reply
  • January 25, 2016 at 4:17 PM
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    I shall recommend give you a very convenient excuse … it was a typological error … !!!

    Reply
  • January 25, 2016 at 4:10 PM
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    That article says ….

    “grey market premium on Precision Camshafts IPO are in the range of INR15-18 per share which indicate that the stock’s listing is expected at more than INR300 per share.”

    This is wrong on 2 counts:

    1) The author has erred in simple maths … we all know that issue price = 186 … + grey market premium = 15 to 18 (as per the author) … and then author goes on further to say …. “which indicate that the stock’s listing is expected at more than INR 300 per share.”

    I do not understand the maths … how can we rely on just stupid utterances … ?

    2) the current Grey market premium is INR 8 to 9 only.

    Reply
  • January 25, 2016 at 4:00 PM
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    186 (Issue Price) + (premium of 15-18) = listing price of 300 ???

    Reply
    • January 25, 2016 at 4:30 PM
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      Thanks for pointing it out eagleye. It has been corrected to INR200 per share, the error is regretted.

      Reply

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