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NCDEX launches Chennai rainfall futures to hedge city precipitation swings
The Chennai contract joins Mumbai as the second Indian location with exchange traded rainfall weather derivatives, with annual rainfall of about 1,400 mm and roughly 70% falling from September to December.
NCDEX has expanded its parametric weather derivatives offering by launching a futures contract tied to rainfall in Chennai and the surrounding area, aiming to help market participants hedge financial exposure to rainfall extremes and variability.
The exchange said the new contract is the second location in India for rainfall weather derivatives after NCDEX launched its first Mumbai rainfall futures in May, adding that it began discussing weather-index hedging plans as far back as 2008.
NCDEX cited Chennai’s dependence on the Northeast Monsoon, noting that September to December contributes the majority of the city’s annual rainfall. It also pointed to the potential for pronounced within season swings because much of Chennai’s rainfall comes from weather systems originating over the Bay of Bengal, including lows, depressions, and cyclones.
According to NCDEX, rainfall based derivative contracts settle using measured precipitation at specified reference stations over an observation window, providing a transparent and exchange traded platform for hedging rainfall related financial risks affecting sectors including infrastructure, construction, transportation, retail, logistics, hospitality, water management, insurance, and energy.