Following the success of ‘RAINMUMBAI’, India’s first rainfall-based weather derivatives contract, NCDEX on Monday announced the launch of a second contract on similar lines to capture the Northeast monsoon.  The Northeast monsoon largely impacts the southern parts of the country. Called ‘RAINCHNNAI’, the contract, according to an official statement, is designed to help market participants hedge financial exposure arising from the Northeast (retreating) monsoon, which accounts for nearly 70 per cent of Chennai’s annual rainfall.  Although the Northeast monsoon officially starts in October, an official said September will be common for both ‘RAINMUMBAI’ and ‘RAINCHNNAI’ for continuity, ensuring no break in hedging. The ‘RAINCHNNAI’ contracts will be for the months of September, October, November and December, while ‘RAINMUMBAI’ covers the months of June, July, August and September.  Building on the experience gained from ‘RAINMUMBAI’, the contract has been developed in collaboration with IIT Bombay and anchored in official data from the India Meteorological Department (IMD), the statement said.  The contract is built on a scientifically structured Cumulative Deviation Rainfall (CDR) model, which tracks the deviation of actual rainfall from the Long Period Average (LPA) at Chennai’s Meenambakkam and Nungambakkam stations, benchmarked against decades of IMD data.  In the case of RAINMUMBAI, it is IMD data from observations at Santacruz and Colaba stations that form the basis of settlement.  The contract will have a tick size of 1 millimetre and maximum order lots of 50 lots.  “RAINCHNNAI will enable participants to manage rainfall-linked risk through a transparent, standardized, and cash-settled futures contract and RAINMUMBAI together with RAINCHNNAI extend rainfall risk management across India’s full monsoon cycle, from the Southwest Monsoon (June-September) to the Northeast Monsoon (September-December),” said Kedar Deshpande, Chief Business Officer, NCDEX.  The methodology of RAINCHNNAI is similar to RAINMUMBAI, based on LPA determined from the past 50 years and actual rainfall.  Deshpande said unlike traditional insurance products, these weather derivatives are settled purely on observed data, eliminating the need for loss assessment.  “This enables faster settlement cycles and greater operational efficiency for participants. RAINCHNNAI and RAINMUMBAI, together completes India’s complete rainfall risk management ecosystem and building a new asset class for India’s climate economy,” he added.