Can you trade rainfall? NCDEX launches RAINMUMBAI futures for derivative traders – Explained

India’s National Commodity and Derivative Exchange (NCDEX), in a latest move, launched an exchange-traded weather derivative contract, also known as the RAINMUMBAI, which seeks to offer traders an asset class to hedge against rainfall fluctuations in the country.

Although investors can not buy rainfall physically through this weather derivative, the new SEBI-approved non-deliverable asset aims to target farmers, construction companies, banks, and other key clientele with the ability to measure risks against weather variability.

In an official announcement on May 20, NCDEX said that this product has been developed in collaboration with the Indian Institute of Technology (IIT) Bombay, while leveraging the weather data from the India Meteorological Department (IMD).

Investors might often be confused due to the product name; however, this derivative does not aim to give traders a platform to carry out speculative trading.

As per the official announcement, this weather contract seeks to offer a new-gen insurance product-like data, which is settled purely based on the observed data, eliminating the need for loss assessment.

RAINMUMBAI futures – what you need to know

The weather derivative contract with a ticker name “RAINMUMBAI” is a cash-settled futures contract with a maximum lot size of 50 lots and will be open for trading from May 29, 2026, with its data basis in Mumbai.

The tick size or the unit of the futures contract will be 1 mm of rainfall, the data for which will be sourced in combination from IMD’s surface rainfall, automatic weather stations (AWS) observations situated at Mumbai’s Santacruz and Colaba.

The official announcement further mentioned that investors or traders will be able to buy or sell the RAINMUMBAI futures between 10 am and 11:30/11:55 pm from every Monday to Friday on the commodity exchange.

The daily price limit of the futures will have an initial slab of 6%, an enhanced slab of 3%, and an aggregate DPL of 9%, as per the data.

RAINMUMBAI futures will have a last trading day on the business day immediately before the last working calendar day of the contract expiry month, barring Saturdays and Sundays, where the markets will remain closed.

The final settlement price of the futures contract will be the underlying spot value, which the asset has arrived on the next calendar day from the last trading day, as per the announcement.

“The contracts are based on a scientifically structured Cumulative Deviation Rainfall (CDR), which measures the deviation of actual rainfall from the Long Period Average (LPA) during the monsoon months (June to September),” said Arun Raste, the MD and CEO of NCDEX, in an official statement.

Does NCDEX have weather indices?

The National Commodity and Derivative Exchange (NCDEX) also has two baseline weather indices, which have been maintained by the platform before launching the individual tradable city contracts.

NCDEX has the ‘Indian Rain Index’ and the ‘Indian Monsoon Index’, which track the macro trends in the country during the rainfall season, which brings in the critical South-West Monsoon winds from the Arabian Sea.

As per the official data, the weather indices are based on the occurrence of a weather event, and the underlying assumption for the same is the same in case of a flood or drought situation, which can risk loss of crops and income risks in the market.

“Weather index will not only help mitigate the high risk faced by vulnerable households and economic agents within the rural sector, but also it will reduce government cost of natural disaster aid,” as per the index methodology.

The Indian Monsoon Index starts its tracking every year, starting from June 1 to September 30, and the last data collected in 2025 showed that the monthly high was at 4.12, as per NCDEX data. Meanwhile, the Indian Rain Index tracks the monthly performance of the rainfall across the country.

Investors across the weather-sensitive sectors like agriculture and allied sectors, power and energy, utilities, infrastructure and construction, financial institutions, logistics and transport, and retail and corporate will be looking forward to the RAINMUMBAI futures as a hedge against sudden disruptions.