Weather derivatives: NCDEX to launch Indias first SEBI-approved monsoon hedge on May 29

National Commodity and Derivatives Exchange (NCDEX) said it will start India’s first exchange-traded weather derivatives contract on May 29. NCDEX said the product will let businesses and farmers hedge risks linked to monsoon swings. The contract is named RAINMUMBAI and has approval from the Securities and Exchange Board of India (SEBI).

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RAINMUMBAI was created with the Indian Institute of Technology Bombay (IIT Bombay). It uses rainfall information from the India Meteorological Department (IMD). NCDEX Managing Director and Chief Executive Arun Raste said, "India has lived with monsoon uncertainty for centuries. RAINMUMBAI provides every stakeholder with a regulated, scientific tool to manage this uncertainty.\"

NCDEX weather derivatives contract RAINMUMBAI: Index and data

The futures contract follows the Cumulative Deviation Rainfall (CDR) index. The index shows how actual rainfall differs from the Long Period Average (LPA). The LPA uses a 30-year record from 1991 to 2020. Daily figures come from IMD stations at Santacruz and Colaba in Mumbai.

NCDEX said these weather derivatives differ from crop insurance in a key way. The contracts are cash-settled using only measured weather readings. NCDEX said this avoids physical checks of losses and can speed up payouts. The settlement depends on the observed meteorological outcome during the season.

NCDEX weather derivatives contract RAINMUMBAI: Trading terms

Each contract has a lot multiplier of Rs 50 per millimetre. The ticket size is one millimetre, and the maximum order size is 50 lots. Trading will take place Monday to Friday from 10:00 am local time. NCDEX said the daily price limit is set at 9 per cent.

NCDEX said the instrument is meant for many weather-linked users. It listed agriculture, power utilities, infrastructure, banks with agricultural loan portfolios, and logistics operators. The exchange said these groups face direct effects from rainfall shifts. The contract aims to offer a standard, regulated hedge.

NCDEX weather derivatives contract RAINMUMBAI: IMD and SEBI oversight

Bikram Singh, head of IMD’s Regional Meteorological Centre in Mumbai, linked credibility to stable datasets. Bikram Singh said, \"It is science meeting finance in a regulated marketplace,\" while pointing to standardised long-term weather records. NCDEX operates under SEBI oversight and focuses on agricultural commodities.

NCDEX said RAINMUMBAI will begin trading on May 29 after SEBI approval. The exchange said the contract uses IMD station data and a 30-year LPA benchmark. It said the cash-settled structure relies on recorded rainfall, not damage checks. NCDEX said the product targets sectors exposed to monsoon uncertainty.

With inputs from PTI