SEBI Approves NSE’s Monthly Electricity Futures: Ushering in a New Era for India’s Power Market

SEBI Approves NSE’s Monthly Electricity Futures to Strengthen Power Market and Support Net-Zero Goals

The National Stock Exchange (NSE) has received approval from the Securities and Exchange Board of India (SEBI) to introduce monthly electricity futures contracts. This move aims to deepen India’s power markets and bolster long-term structural reforms outlined under the Electricity Act, 2003. NSE hailed the approval as a "significant milestone" in a press release issued on Wednesday.

“India’s path to achieving net-zero emissions by 2070 requires substantial annual investment—estimated at over $250 billion through 2047, according to NITI Aayog. By 2030, over half of the nation’s installed power capacity is expected to come from renewable sources like solar and wind,” the release noted. It emphasized that a vibrant electricity derivatives market is critical to attracting large-scale climate finance from both domestic and international investors.

With the launch of monthly electricity futures, NSE aims to:

1. Offer market participants effective hedging tools against electricity price volatility.

2. Enable better price discovery and transparency in the power sector.

3. Drive capital investments across the electricity value chain—from generation to retail distribution.

Commenting on the development, NSE MD & CEO Ashishkumar Chauhan stated, “This approval is just the first step in NSE’s broader vision for a comprehensive electricity derivatives ecosystem. Subject to regulatory approvals, we plan to gradually introduce contracts for difference (CFDs) and long-duration contracts such as quarterly and annual futures.”

Chauhan emphasized that a phased and calibrated rollout will help maintain market integrity and boost investor confidence. He highlighted the need for spot and futures electricity markets to evolve together to create a virtuous cycle of liquidity and price stability.

He added that while a financially settled futures market will allow participants to hedge risk effectively, a robust day-ahead spot market is key to ensuring accurate price signals.

SEBI’s nod to NSE follows closely on the heels of a similar approval granted to the Multi Commodity Exchange (MCX) for launching its own electricity derivatives.

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