Mumbai, May 21: The National Commodity and Derivatives Exchange (NCDEX) has launched India’s first exchange-traded weather derivative contract, named ‘RainMumbai.’ This initiative has already received approval from SEBI.
According to the exchange, the trading for this derivative contract will commence on May 29.
In a statement, NCDEX highlighted that this contract transforms the uncertainty of the monsoon into a measurable, manageable, and tradable risk within a regulated and scientific framework.
Developed in collaboration with IIT Mumbai and based on official data from the India Meteorological Department (IMD), this product enables participants to protect themselves against financial losses caused by fluctuations in rainfall.
NCDEX explains that the rainfall-based derivative is a contract whose payout depends on the actual rainfall recorded at a specific location over a defined period.
The measurement of rainfall will utilize rain gauges and Automatic Weather Stations (AWS), recorded according to IMD standards in a standard 24-hour cycle from 8:30 AM to 8:30 AM the following day.
The ‘RainMumbai’ contract will monitor deviations from the long-term average rainfall (LPA) in Mumbai during the monsoon season (June to September). It is based on a scientifically structured Cumulative Deviation Rainfall (CDR) model.
Additionally, this model uses surface rainfall data from IMD and observations from the Santa Cruz and Colaba AWS, compared against a 30-year historical dataset (1991-2020 LPA).
This system will be cash-settled and designed to ensure transparent, data-driven settlements without physical loss assessments, facilitating faster and more efficient risk management.
NCDEX stated that this product targets a wide range of stakeholders, including farmers, construction companies, power firms, logistics operators, and banks linked to agricultural loans. It offers a risk management tool that complements traditional mechanisms like insurance and government relief measures.
Arun Rathore, Managing Director and CEO of NCDEX, remarked, “India has faced monsoon uncertainty for centuries. RainMumbai provides each stakeholder with a regulated, scientific tool to manage this uncertainty.”
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