For decades, the Mumbai monsoon has been a subject of everyday conversation around romanticised chai dates, gruelling local train delays, and city-wide flooding. But for India’s active trading community, the monsoon can now be an asset class. Giving India its first weather derivative instrument, the National Commodity & Derivatives Exchange Limited (NCDEX) has introduced an exchange-traded weather derivative contract, appropriately ticketed as RAINMUMBAI.
Weather derivatives are financial instruments that can help manage risk associated with adverse or unexpected weather conditions. Their payoff depends on actual rainfall recorded at a particular location during a specific period of time. “Lower exposure to weather variability makes weather-sensitive sectors more attractive to investors, supporting long-term investment and growth," NCDEX said.
