Grey market premium (over issue price), is referred to an unofficial premium of IPO, which is an illegal trade, but played many times by legal entities like Brokers, NBFCs and even Investment bankers. There were instances of huge premium seen ruling during IPO, which tempted investors to apply to see getting trapped on lower listing, thus making losses and vice versa.  

Gland Pharma IPO closed on 11th November, with listing likely on Friday 20th November. Issue evoked poor response, with subscribing by 2.06 times, with QIB category 6.4x, HNI category 0.51x and Retail category by 0.24x times. This may imply poor listing, but we see it happening with good listing. 2 prominent Investment Bankers seen played a big role, with grey market premium manipu;ation, which opened at Rs. 200 per share, fell to Rs. 15, when IPO was open, (which evoked poor subscription) with premium now ruling at Rs. 130 per share.  Mission Accomplished of these 2 bankers, as they learnt to have mopped  up good chunk in all 3 categories.

Hence, grey market is a big fraud on the market mechanics and a double edged sword for retail investors, who get cut many times on both sides, when taking a call  based on this quote. Shallowness of this market makes easy bucks for vested interests, as it is easy for them to manipulate on small volume.

So, never take investment calls on an IPO, based on Grey market premium.