Mumbai, country's financial capital, weather plays a very important role especially during south west monsoon season as it receives on an average 220 cm of rainfall in monsoon season. Rainfall based weather derivative contract is introduced with the objective of enabling market participants to manage financial risks arising from variability in rainfall. Rainfall is measured in millimeters (mm) and represents the most critical weather parameter influencing economic activity in India. High intra-season variability and frequent extreme events create material operational and financial risks for agriculture supply chains, municipal services, construction, transport, retail, utilities, hospitality, and insurers. An exchange-traded rainfall derivative provides transparent price discovery and standardized risk transfer mechanism for these participants.

Futures contract based on rainfall as underlying parameter settles on measured precipitation at a specified reference station over a defined observation window, as notified by the Exchange. 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. Thus 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.