NCDEX launches India’s first weather derivatives contract based on Mumbai rainfall

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The contract will be launched on June 1, 2026, and is aimed at helping market participants hedge financial exposure arising from fluctuations in rainfall during the monsoon season. Developed in collaboration with IIT Bombay and based on official rainfall data from the India Meteorological Department, the product seeks to convert monsoon variability into a measurable and tradable risk within a scientific and regulated framework.

The contract has been designed for a wide range of users, including farmers, construction firms, power utilities, logistics operators and banks with agricultural loan portfolios. According to NCDEX, the product is intended to complement existing mechanisms such as insurance and government relief by providing a market-linked risk management tool.

The exchange said the launch represents the emergence of a new asset class for India’s climate economy and is a significant development in strengthening the country’s climate risk management ecosystem.

The contract will be structured as a futures contract under the ticker symbol “RAINMUMBAI”. It will be based on rainfall deviations from the Long Period Average (LPA) in Mumbai during the monsoon months from June to September. The contract will use a tick size of 1 mm with a lot multiplier of Rs 50 per mm and a maximum order size of 50 lots.
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The settlement mechanism will be cash-settled, with data sourced from IMD surface rainfall observations and Automatic Weather Stations located at Santacruz and Colaba. Trading will take place from Monday to Friday between 10:00 AM and 11:30 PM or 11:55 PM, depending on daylight savings time adjustments.

The product framework is based on a scientifically structured Cumulative Deviation Rainfall (CDR) model, which measures the deviation of actual rainfall from the historical average. The benchmark has been built using a 30-year rainfall dataset covering the period from 1991 to 2020.

Speaking on the launch, NCDEX Managing Director and CEO Arun Raste said India has lived with monsoon uncertainty for centuries and that the contract offers stakeholders a scientific and regulated tool to manage that uncertainty. He added that, unlike traditional insurance products, the derivatives would be settled purely on observed weather data, removing the need for loss assessment and enabling faster settlements.

Highlighting the role of reliable weather data, Bikram Singh from IMD said the department’s observational infrastructure and long-term datasets provide a strong foundation for building transparent and credible rainfall indices. He described the initiative as an example of science and finance coming together in a regulated marketplace.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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