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Informist, Wednesday, May 20, 2026

 

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--NCDEX launches weather derivatives on Mumbai rainfall
--NCDEX: Weather derivatives on Mumbai rainfall named RAINMUMBAI
--NCDEX: RAINMUMBAI futures contracts to be cash-settled
--NCDEX: RAINMUMBAI futures based on monsoon cumulative deviation rainfall
--NCDEX: RAINMUMBAI futures contract to go live on Jun 1
--NCDEX: RAINMUMBAI futures contracts available for Jun, Jul, Aug, Sept
--NCDEX: RAINMUMBAI futures underlying rainfall deviation long period average
--NCDEX: Weather derivatives a new asset class for India
--NCDEX: RAINMUMBAI futures to enable seamless hedging across monsoon Jun-Sep
--IMD Singh: To provide daily data to NCDEX for weather derivatives
--NCDEX Raste: Next rainfall F&O pdt may be on Chennai for northeast monsoon
--NCDEX: RAINMUMBAI F&O last trading day a day before last calendar day of mo
--NCDEX: RAINMUMBAI futures trading lot set at INR 50 per 1 millimetre
--NCDEX: RAINMUMBAI futures trade lot value to be about INR 110,000 currently
--NCDEX: RAINMUMBAI futures to have stringent position limits, margins
--NCDEX: RAINMUMBAI futures to aid rainfall risk hedging
--NCDEX: RAINMUMBAI futures to aid weather exposure monetisation

 

NEW DELHI/MUMBAI – National Commodity and Derivatives Exchange Ltd. Wednesday launched the country's first weather futures contract, named RAINMUMBAI, enabling the market to hedge against business losses from unexpected rainfall during the monsoon season starting in June. The contract will go live from Jun. 1, and the underlying is the deviation in Mumbai's actual rainfall from the 30-year historical average. 

 

The exchange will showcase the India Meteorological Department's reading of the daily actual rainfall in Mumbai and compare it with the long-term historical average for that date. "If Mumbai receives more rain than normal, the spot rises; if less, it falls. The spot is updated daily at approximately 9:15 AM using IMD surface data from the Santacruz and Colaba weather stations," NCDEX said in a release.

 

"India has lived with monsoon uncertainty for centuries. RAINMUMBAI provides every stakeholder with a regulated, scientific tool to manage this uncertainty," said Arun Raste, managing director and chief executive officer, NCDEX. The exchange aims to attract a wide range of stakeholders, such as farmers, construction companies, power utilities, banks, logistics companies, and tourism businesses, whose operations are highly sensitive to rainfall. 

 

"The starting anchor (of the contract) is 2,206.7 on day zero, which is nothing but the long-period average. Then every day, we are computing daily deviation or monthly deviation," an official from NCDEX said at a press conference in Mumbai. 

 

Unlike insurance products, NCDEX's weather derivatives facilitate faster settlement cycles and better operational efficiency. While insurance products require proof of loss or the government's declaration of a flood or drought to cover physical damage, RAINMUMBAI settles losses caused by rainfall deviations even when there is no physical damage.    

 

"RAINMUMBAI hedges volume, income, and operational risk, not physical damage. Think of it as a complement to, not a replacement for, insurance coverage," NCDEX said in a release, adding that the futures contract ensures corporates and non-farm participants are adequately protected against weather-related financial risks.

 

FUTURE PLANS

Though NCDEX has currently launched futures contracts to hedge only rainfall risks in Mumbai, it plans to expand derivatives coverage to other cities, such as Chennai, and even include other weather components, such as temperature, to cover losses caused by extreme heat.

 

"When we say weather, definitely temperature will be something which is on our radar," Raste said. Temperature has strong financial implications on crop health, power demand, and consumer goods sales. 

 

Asked why NCDEX selected Mumbai for starting rainfall-based weather derivatives, the exchange officials said that the city has the highest seasonal long-period average among major commercial cities. Also, Mumbai's rainfall is highly volatile, which raises the risk of significant weather-linked profit and loss exposure for industries based in the city. 

 

"Mumbai's monsoon rainfall showed 26% annualised daily volatility in 2025, comparable to equity indices, ensuring meaningful price discovery," NCDEX said in a release. In addition, the exchange is exploring whether Mumbai rainfall data correlates with that of nearby cities to cross-hedge business exposures across city neighbourhoods. 

 

Raste said the next expansion of rainfall—based derivatives is likely to be for Chennai, so that businesses can hedge the losses incurred during the northeast monsoon. NCDEX has only commercially subscribed to IMD's real-time data feeds from automatic weather stations in Mumbai, but is likely to avail high-frequency data from Chennai as well in the future. 

 

"IMD's observational infrastructure and long-term datasets provide a strong foundation for building credible and transparent rainfall indices. It is science meeting finance in a regulated marketplace," Mumbai's Regional Meteorological Centre Head Bikram Singh said. 

 

The exchange expects industries with negative earnings correlation to adverse rainfall to seek protection by entering as buyers. Farmers, construction firms, airlines, logistics companies, and power distributors face risks such as cost escalation, demand destruction, and supply disruptions during periods of adverse rainfall. 

 

Meanwhile, hydroelectric power producers, solar power firms, or water-intensive industries such as cement and beverage companies can be sellers, as they have neutral or positive correlations with adverse rainfall, NCDEX said. These sectors can monetise adverse rainfall events by seeing demand growth, gaining pricing power, or benefiting from repair activities linked to excess rainfall or drought conditions. 

 

CONTRACT SPECIFICATIONS

NCDEX will launch RAINMUMBAI contracts for each of the four monsoon months: June, July, August, and September. There is no monthly spot discontinuity, as spot carries forward each contract month, enabling seamless hedging across the monsoon season, NCDEX said. 

 

NCDEX has set the contract's tick size at 1 millimetre, valued at INR 50, meaning each 1 millimetre movement in the spot price will result in a profit or loss of INR 50 per lot. "Spot means cumulative deviation from monsoon LPA (long-period average) till that day. It is derived by calculating the deviation of actual rainfall and LPA of the day, added to monsoon LPA," Kedar Deshpande, chief business officer, NCDEX, told Informist.

 

The contract's trade lot value on day zero is INR 110,335, and the maximum order size is 50 lots per trade. The contract will be cash-settled, and the last trading day will be one day before the month-end.  

              

To ensure liquidity and market traction from the first day, market makers will provide continuous two-way quotes within a prescribed spread. This will enable efficient price discovery and smooth entry and exit for participants. 

 

NCDEX said that the futures contract will have stringent position limits and margins. Member-wise position limit is set at 400,000 lots or 20% of the market-wide open interest, whichever is higher. Meanwhile, client-wise position limit is 40,000 lots or 5% of the market-wide open interest. "Additional special margins may be imposed by SEBI or the Exchange in cases of unusual price movement or volatility," NCDEX said. 

 

"The monsoon now has a ticker symbol and rupee value. India joins the global climate risk market," NCDEX said, adding that global weather derivatives are a $25 billion market. End