NSE receives Sebi nod to launch monthly electricity futures

The National Stock Exchange (NSE) has received a nod from capital markets regulator the Securities and Exchange Board of India (Sebi) to launch monthly electricity futures contracts. The launch of monthly electricity futures will provide market participants with an effective hedging tool against electricity price volatility. This would also encourage capital investments across the electricity value chain—generation, transmission, distribution, and retail.

“This marks a significant milestone in deepening India’s power markets and supporting long-term structural reforms initiated under the Electricity Act, 2003,” NSE said in a statement.

The release noted that India’s journey towards achieving its net-zero emissions target demands substantial investment—estimated at over $250 billion per year till 2047, according to a NITI Aayog report. By 2030, renewable energy sources such as solar and wind are expected to contribute over 50% of the nation’s installed power capacity.

“A robust and dynamic electricity derivatives market is essential to attract this scale of climate finance from both domestic and global investors,” it added.

Ashishkumar Chauhan, MD & CEO of NSE, said this approval is only the beginning of NSE’s vision for a broader electricity derivatives ecosystem. He said that 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 NSE MD said that a calibrated and phased approach will ensure both market integrity and investor confidence. “It is crucial for the spot and futures electricity markets to evolve in tandem to create a virtuous cycle of liquidity and stability. A financially settled futures market will allow participants to hedge their risks effectively, while a robust day-ahead spot market will ensure 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,” he added.

Notably, the NSE was the first stock exchange in India to establish an electricity exchange, launching Power Exchange India Limited (PXIL) in 2008. The exchange’s strong understanding of both spot and derivatives markets uniquely positions it to build an integrated and liquid electricity derivatives market. 

NSE Clearing Limited, India’s largest clearing corporation, will manage the clearing and settlement of these contracts. Recognised as a qualified central counterparty (QCCP) by Sebi, it is backed by a robust settlement guarantee mechanism and a very strong net worth.