RAINMUMBAI India's First Exchange-Traded Weather Derivative

Weather derivatives are financial instruments that organizations or individuals can use as part of a risk management strategy to reduce risk associated with adverse or unexpected weather conditions. A weather derivative has an underlying measure such as rainfall, temperature, humidity, or snowfall.

A rainfall-based derivative is a specific type of weather derivative whose payoff depends on actual rainfall recorded at a defined location during a specific period.

The southwest monsoon is a critical determinant of India's macroeconomic performance, accounting for nearly 75–80% of annual rainfall between June and September. Monsoon outcomes significantly influence economic planning, policy decisions, and business expectations. Increasing weather variability — particularly in rainfall — has emerged as a key risk factor across multiple sectors: agriculture, power, construction, logistics, tourism, and insurance.

Currently, weather risk mitigation in India primarily relies on insurance products (crop insurance, motor insurance) and government support mechanisms. These solutions have limited coverage, involve complex procedures, and often require administrative intervention to assess losses. Insurance payouts are triggered only when predefined thresholds are breached, while government relief is largely confined to catastrophic events and the agricultural sector.

Weather derivatives address these gaps by offering a market-driven, transparent, and faster risk management solution. Based on objective and verified weather data, they enable farmers, businesses, and institutions to freely hedge weather risks without the need for loss assessment or government intervention.

• Effective Hedging — stabilises earnings and reduces weather-related risk exposure by helping businesses offset financial losses from adverse conditions such as drought or excess rainfall.
  

• Improved Earnings and Cost Stability — by offsetting weather-driven revenue shortfalls or cost overruns, weather derivatives reduce cash flow volatility.
  

• Better Budgeting and Forecasting — enables firms to plan budgets more accurately by transferring weather uncertainty to the market, improving financial planning and liquidity management.
  

• Enhanced Risk Management — weather derivatives form part of an integrated risk management framework, helping organizations identify, quantify, and mitigate weather-related financial risks.
  

• Price and Market Stability — by reducing uncertainty for weather-dependent sectors, they contribute to more stable commodity prices and supply planning.
  

• Encouragement of Investment — lower exposure to weather variability makes weather-sensitive sectors more attractive to investors, supporting long-term investment and growth.
  

• Improved Decision Making — market-based pricing of weather risk provides valuable signals for crop selection, planting schedules, inventory planning, and capacity utilization.

RAINMUMBAI (ticker: RAINMUMBAI) is India's first exchange-traded, SEBI-approved weather futures contract, listed on the National Commodity & Derivatives Exchange Limited (NCDEX). It is classified as a Weather Derivative (Mumbai Rainfall) under SEBI's framework, with weather formally notified as Goods under the Securities Contracts (Regulation) Act (SCRA), 2024.

The contract is based on the Monsoon Cumulative Deviation Rainfall (CDR) — a daily measure of how much Mumbai's actual monsoon rainfall deviates from its 30-year historical average (Long Period Average, or LPA, of 2,206.7 mm). Contracts are available for each of the four monsoon months: June, July, August, and September.

No. RAINMUMBAI is fundamentally different from insurance. Insurance requires proof of loss — such as a government declaration of flood or drought — and covers physical damage. RAINMUMBAI settles purely on actual IMD rainfall data. No declaration of loss is required. It hedges volume, income, and operational risk rather than physical damage. It is designed to complement, not replace, conventional insurance coverage.

PMFBY (Pradhan Mantri Fasal Bima Yojana) and WBCIS cover physical crop damage and require administrative loss assessment. They address damage, not income volatility.

RAINMUMBAI hedges against revenue and volume impact caused by rainfall deviation — even when there is no physical crop loss. It is exchange-traded, transparent, instantly liquid, and requires no government intervention for settlement.

Weather derivatives are already traded and widely used in several international markets through both regulated exchanges and over-the-counter (OTC) markets, commonly linked to parameters such as temperature, rainfall, and snowfall. They are most prominently traded on the Chicago Mercantile Exchange (CME Group), which offers standardized futures and options contracts based mainly on temperature indices — Heating Degree Days (HDD) and Cooling Degree Days (CDD) — for multiple cities across the US, Europe, Japan, and parts of Asia. These HDD/CDD futures were introduced in the US in 1997.

RAINMUMBAI adapts this proven concept for India's monsoon-driven climate risk, using rainfall deviation (CDR) instead of temperature deviation and targeting sectors where rainfall — not temperature — is the primary economic driver. India's introduction of such instruments marks an important step in aligning with global practices in weather risk management. The global weather derivatives market stands at approximately USD 25 billion.

Mumbai was selected as the pilot city based on four key criteria:

• Strong data backbone — IMD's Santacruz and Colaba stations offer 97–100% data availability, ensuring robust and reliable settlement data.

• High value at risk — Mumbai is India's financial and commercial headquarters, home to industries with significant weather-linked profit-and-loss exposure.

• Communication advantage — Mumbai serves as a natural financial benchmark, maximising market participation and familiarity.

• High volatility — Mumbai monsoon rainfall recorded an annualised daily volatility of 26% in 2025, comparable to equity indices, making it suitable for a futures contract.

Additionally, Mumbai has more rainy days in the monsoon season than many comparable cities, which creates more trading opportunities and distributes risk more effectively across participants.

Rainfall is measured using rain gauges or automatic weather stations (AWS) installed at specific locations. The standard unit of measurement is millimeters (mm), representing the depth of water collected in the gauge.

Rainfall for any given day is defined as the total cumulative rainfall measured during the 24-hour period ending at 8:30 AM on that day. For instance, the rainfall for June 5, 2025 is the accumulated rainfall recorded from 8:30 AM on June 4, 2025, up to 8:30 AM on June 5, 2025. Even if a portion of the 24-hour period falls on the previous calendar day, the entire 8:30 AM-to-8:30 AM measurement is attributed to the current day's value as per IMD standards.

The basis centre for RAINMUMBAI is Mumbai. The two stations used for spot price calculation are:

• Colaba Station (IMD)

• Santacruz Station (IMD)

Both stations are operated by the Indian Meteorological Department (IMD). Surface observations are manually recorded by IMD officials using calibrated, standardized instruments following World Meteorological Organization (WMO) standards. Observations are taken every three hours during synoptic hours between 08:30 AM and 08:30 AM of the next day (eight observations total), which are then aggregated to arrive at the daily rainfall total.

NCDEX uses two types of rainfall data:

• Surface Rainfall Observation (Primary): Used for contract settlement and spot construction, given its higher reliability, longer historical availability, and recognized acceptance in meteorological and research standards. This is the same data used for national weather advisories.

• Automatic Weather Stations (AWS) Observations (Secondary): Measurements are recorded at 15-minute intervals (96 observations per day). AWS data is displayed on the NCDEX website for real-time information dissemination, helping participants track intra-day rainfall trends.

A fallback mechanism is in place: AWS data serves as a backup in situations where Surface data is delayed, temporarily unavailable, shows discrepancies, or requires validation. NCDEX may also onboard additional agencies as an additional fallback mechanism. The Exchange will inform trade participants regarding onboarding of any such additional agencies.

Both Surface and AWS observations are fetched through API feeds from the IMD data server. Surface data is accessed once daily; AWS data is fetched at 15-minute intervals or higher frequency.

Settlement data is sourced exclusively from IMD, with 97–100% data availability at both stations. RAINMUMBAI does not predict weather. The product settles on actual IMD-recorded rainfall data. Its purpose is risk management — allowing participants to hedge their financial exposure to rainfall variability. NCDEX does not promise any specific settlement outcome. The data cannot be manipulated as it is sourced from IMD's official API mechanism and follows established WMO standards.

The Long Period Average (LPA) refers to IMD's climatological normal computed over a 30-year reference period, currently 1991–2020. LPA is calculated separately for each station and for each calendar day, denoting the expected or climatologically normal rainfall for that day at that location, expressed in millimeters.

For example, the LPA for 1 June at IMD Colaba is derived by averaging the rainfall recorded on 1 June for each year from 1991 through 2020. This approach ensures consistency in long-term climate comparison.

The Mumbai Monsoon Season LPA (sum of daily LPA from 1 June to 30 September) is 2,206.7 mm, based on IMD data. This figure serves as the starting anchor point for the CDR spot calculation.

The Monsoon Cumulative Deviation Rainfall (CDR) methodology is the core framework for calculating the daily spot price of RAINMUMBAI. It tracks the cumulative deviation of Mumbai's actual rainfall from the LPA, starting from June 1 each year.

Step 1 — Mumbai Daily LPA

The Mumbai Daily LPA for a particular date (Date1) is the simple average of the two station LPAs:

LPA_Mumbai_Date1 = (LPA_Colaba_date1 + LPA_Santacruz_date1) / 2

Step 2 — Mumbai Daily Rainfall

The Mumbai Daily Rainfall for a particular date is:

Rain_Mumbai_Date1 = (Rain_Colaba_date1 + Rain_Santacruz_date1) / 2

Step 3 — Daily Deviation

The Mumbai Daily Deviation for a particular date is:

Deviation_Mumbai_Date1 = Rain_Mumbai_Date1 - LPA_Mumbai_Date1

A positive deviation means excess rainfall above LPA on that day. A negative deviation means deficit rainfall below LPA on that day. If actual rainfall exactly matches the LPA, the deviation is zero and the spot value remains unchanged.

Step 4 — Cumulative Spot Calculation

Starting on Day Zero (before June 1), the spot is anchored at 2,206.7 mm (the Mumbai Monsoon Season LPA). From June 1, each day's deviation is added to the previous day's spot value:

CDR Spot (Day t) = CDR Spot (Day t-1) + Daily Deviation

• If Mumbai receives more rain than normal (positive deviation), the spot rises.

• If Mumbai receives less rain than normal (negative deviation), the spot falls.

The following example illustrates how the spot is updated day-by-day at the start of the monsoon season:

During the transition from one month to the next (e.g., June to July), the cumulative rainfall deviation up to the last calendar day of the previous month is carried forward. The closing spot value on 30 June becomes the opening spot value for 1 July, ensuring continuity in the cumulative deviation series. This means the spot carries forward each contract month, enabling seamless hedging across the full June–September season with no monthly discontinuity.

• Daily rainfall data for both stations is made available to NCDEX through the IMD API feed at approximately 9:00 AM each day, prior to the commencement of trading.

• The daily spot value is updated by approximately 9:15 AM on every trading day.

• The spot value is updated only once per day on the trading platform and remains unchanged for the entire trading session.

• Since rainfall deviation is calculated for each calendar day, the cumulative deviation for non-trading days (weekends, holidays) is incorporated into the spot value on the next business day's update.

The DPL operates in two stages:

• Initial Slab (6%): Normal trading range for the session.

• Enhanced Slab (3%): Once the initial slab is breached in any contract, the DPL is relaxed by an additional 3% after a cooling-off period of 15 minutes. During the cooling-off period, trading continues within the previous slab.

• Aggregate DPL (9%): The maximum total daily movement permitted.

The DPL on the launch (first) day of a new contract is as per NCDEX circular no. NCDEX/TRADING-010/2021 dated March 22, 2021.

NCDEX has launched four futures contracts under Mumbai Rainfall, with expiry at the end of each monsoon season month. All four contracts were launched simultaneously on May 29, 2026:

The last trading day for any RAINMUMBAI contract is the business day immediately preceding the last calendar day of the contract expiry month. The expiry day (Due Day) is the calendar day immediately following the last trading day.

The following scenarios illustrate how holidays affect the last trading day (using September as an example):

The starting anchor point of 2,206.7 mm remains unchanged when the last trading day of the September contract is the business day immediately preceding the last calendar day (i.e., the standard case). In cases where the last trading day is not immediately preceding the last calendar day (e.g., Cases 2, 4, 5, 7 above), the anchor point (LPA) is revised based on LPA values from June 1 through the calendar day immediately following the last trading day of the September futures contract.

The minimum initial margin is 10% of the initial contract value. National Commodity Clearing Limited (NCCL) uses a risk-based margin model that generates initial margin requirements adequate to cover at least 99% Value at Risk (VaR), with a Margin Period of Risk (MPOR) of 3 days. NCCL reserves the right to change, reduce, or levy any additional margins including markup margins.

All outstanding positions in RAINMUMBAI futures contracts are marked to market daily based on the Daily Settlement Price (DSP) as determined by the Clearing Corporation. The DSP is disseminated at the end of every trading day.

In case of unidirectional price movement or increased volatility, an additional or special margin at a percentage deemed fit by the Regulator, Exchange, or Clearing Corporation may be imposed on the buy side, sell side, or both, in respect of all outstanding positions. Reduction or removal of such margins is at the discretion of the Regulator, Exchange, or Clearing Corporation.

The Clearing Corporation levies Concentration Margin when the overall market-wide Open Interest (OI) of RAINMUMBAI exceeds the specified OI Threshold Level. The OI Threshold Level for RAINMUMBAI is 37,200 lots. The applicable OI slabs and corresponding margin percentages at the clearing member level and at the client level are as specified in the NCCL Master Circular on Risk Management (NCCL/RISK-022/2026 dated April 29, 2026). The Concentration Margin and Threshold Limit became effective from the beginning of the trading day on May 29, 2026.

All open positions of RAINMUMBAI futures contracts are settled daily based on the Daily Settlement Price (DSP). The DSP is disseminated by the Clearing Corporation at the end of every trading day and is used for marking to market all open positions.

Upon expiry, the Final Settlement Price (FSP) is the underlying CDR spot value arrived at on the expiry day (due day) of the month. All open positions outstanding at the close of trading on the last trading day are settled in cash on a T+2 basis at the FSP as published by the Exchange.

Upon expiry of the contract, all outstanding open positions are automatically closed, and no physical delivery or tender obligations arise.

The lot size is 1 Lot and the multiplier is Rs. 50 per millimeter (mm) of rainfall deviation. Each 1 mm movement in the spot equals Rs. 50 of profit or loss per lot. For example, if a participant holds 10 lots and the spot moves 5 mm in their favour, the gain is: Rs. 50 x 5 mm x 10 lots = Rs. 2,500.

Any disputes between members or between members and constituents arising from transactions on the Exchange platform are settled through the Online Dispute Resolution (ODR) mechanism or any other mechanism prescribed by the Regulator. The ODR mechanism facilitates conciliation and arbitration through an online or digital process, governed by the Exchange Rules, Bye Laws and Regulations, and SEBI directives.

As per NCDEX Circular NCDEX/TRADING-022/2026 dated May 26, 2026, transaction charges for RAINMUMBAI futures contracts are as follows:

The introductory rate of Rs. 2.9 per lakh of turnover value for the duration of the 2026 monsoon season (up to September 30, 2026) represents a 50% concession on the standard NCDEX futures transaction charge of Rs. 5.8 per lakh of turnover value. The Exchange reserves the right to amend the above structure at any time after giving notice to its members.

Industries with a negative earnings correlation to adverse rainfall may buy RAINMUMBAI contracts to offset business losses. The economic logic for hedging includes: revenue volatility and cost escalation; demand destruction and rainfall-sensitive consumption; supply disruption and monsoon-linked raw material availability; and capacity underutilization and high operating leverage.

Industries with a neutral or positive correlation to adverse rainfall may take opposite positions on RAINMUMBAI to monetise their weather exposure. The economic logic for selling includes: stable or rising demand; gain in pricing power; benefit from excess rainfall or drought conditions; limited dependence on agriculture; and reconstruction or repair linkages.

RAINMUMBAI is accessible to retail participants through registered commodity members on NCDEX, similar to how retail investors trade commodity futures. Corporate employees, stockbrokers, small business owners, and other individuals with weather-linked income or business exposure may participate. Participants should consult their financial advisor to assess whether the product suits their risk profile.

The following comparison illustrates the key differences between RAINMUMBAI and traditional weather-linked insurance products:

GST is payable by members of the Clearing Corporation on the gross amount charged to their clients for dealing in commodities. All members and their constituents are required to adhere to requirements under the Central Goods and Services Tax Act, 2017 (CGST Act) and the rules made thereunder, including notifications issued by the Central or State Government. Buyers and sellers are responsible for complying with applicable tax obligations.

Commodity Transaction Tax, if and as applicable, will be collected as per the prescribed process. Members are advised to update themselves on the applicable CTT rate from time to time.

Stamp duty is payable on all contract notes issued, as applicable in the State from where the contract note is issued or as per the Stamp Act of the State in which such contract note is received by the client, if such client is located in another state.

All transactions are subject to NCDEX Bye Laws, Rules, Regulations, and circulars, as well as directives issued by SEBI. It is the sole obligation and responsibility of members and market participants to ensure compliance with applicable regulations laid down by authorities, including but not limited to GST, APMC Tax, Mandi Tax, LBT, and Stamp Duty, as applicable from time to time.

The following table provides a concise summary of the most critical parameters for RAINMUMBAI: