Mumbai rains trigger an 8% surge in this unique futures contract: Here's how it works

Heavy monsoon rain in Mumbai has sent Mumbai Rainfall Futures index for expiry in July on the National Commodity and Derivatives Exchange (NCDEX) soaring as much as 8% to hit an intraday high of 2,609.

The index which tracks rainfall in Mumbai came into existence on May 29 and underlying index for these futures contracts tracks the Cumulative Deviation Rainfall (CDR), measuring the variance of Mumbai's actual monsoon rainfall against a 30-year historical average (the 1991–2020 Long Period Average of 2,206.7 mm) using data from the India Meteorological Department (IMD).

Intermittent heavy rain and gusty winds disrupted daily life in Mumbai and neighbouring districts on Monday, suspending long-distance trains to Pune, halting suburban services on a section in Raigad, and slowing road traffic due to waterlogging.

The IMD has forecast more downpours during the day.

Train services on the busy Mumbai-Pune route were suspended early Monday after heavy rains triggered landslides in the Karjat-Lonavala Bhor Ghat section, officials said.

The Central Railway also suspended local train services between Karjat and Khopoli in neighbouring Raigad district after heavy rain washed away the ballast (gravel bed supporting the tracks) between Lowjee and Dolavli stations, they said.

About Mumbai Rainfall futures

The contract provides a transparent, regulated, and exchange traded platform for hedging rainfall related financial exposure and facilitates efficient price discovery, with financial settlement and no physical delivery obligation. Contract will serve as an effective risk management instrument for participants exposed to rainfall variability and supports mitigation of weather-related financial uncertainties using reliable rainfall data, NCDEX said.

How you can trade in Mumbai Rainfall futures index

The futures contract is cash settled based on the CD), compiled using official Indian meteorological data for Mumbai rains. The daily deviation is calculated as follows

Daily rainfall is compared with the long-period average (LPA) during the monsoon season from June to September. Meanwhile, the traded rainfall of CDR is calculated as follows

The rain data is calculated daily at 9:00 am for the past 24 hours. Meanwhile, futures contracts trade on NCDEX with an expiry on the last business day of the month. Each contract is traded in a multiplier of ₹50 per mm.