Market Beat

The National Stock Exchange of India (NSE) has received approval from the Securities and Exchange Board of India (SEBI) to launch monthly electricity futures contracts. This development marks a key step toward strengthening India's power markets and advancing the structural reforms outlined in the Electricity Act, 2003.

According to a NITI Aayog report, India's transition to net-zero emissions by 2070 will require annual investments exceeding $250 billion through 2047. By 2030, renewable energy sources like solar and wind are expected to account for over 50% of the country's installed power capacity. A well-developed electricity derivatives market is crucial to attracting both domestic and global capital to support this transition.

The new monthly electricity futures contracts aim to provide market participants with tools to hedge against price volatility, enabling more transparent and efficient price signals in the power sector. They are expected to spur investments across the electricity value chain, from generation to retail.

Ashishkumar Chauhan, MD & CEO, NSE said, 'This approval is only the beginning of NSE's vision for a broader electricity derivatives ecosystem. Plans are underway to gradually introduce contracts for difference (CFDs) and other long-duration electricity derivatives such as quarterly and annual contracts subject to regulatory approvals'

The introduction of these contracts will follow a calibrated, phased approach to ensure market integrity and build investor confidence. Aligning the growth of both spot and futures electricity markets is essential to creating a stable, liquid ecosystem. Financially settled futures will allow effective risk hedging, while a robust day-ahead spot market will support reliable price discovery.

NSE is committed to working closely with all market participants, regulators, and stakeholders to align efforts around enabling policies such as Market-Based Economic Dispatch (MBED) and market coupling initiatives by CERC, as well as SEBI's framework on CFDs.

Clearing and settlement of the new contracts will be handled by NSE Clearing, a Qualified Central Counterparty (QCCP) recognized by SEBI. The entity is supported by a strong net worth and a well-established settlement guarantee mechanism.

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