The rainfall, stock, and agri-commodity indices are the economic indicators for Indian economy. Therefore, research is needed to explore the complex relationship between rainfall and economic indicators and its longterm implications. Only a few studies are available on this relationship, and no study gives complete, conclusive evidence on this relationship. Therefore, the present study focused on determining whether there is any relationship between the rainfall index and stock/agri-commodity indices. This study employed the advanced statistical tools like ADF test, correlation, Granger causality test, and GARCH (1,1) model. The research utilized the monthly average rainfall index and the Sensex index from 1991 to 2020. Similarly, the study employed the monthly average Guarex agri-commodity index for the period from 2018 to 2020. The study found that there is no relationship and causality relationship between the rainfall index and the Sensex index. The GARCH (1,1) model shows that the rainfall index has no impact on the volatility of the Sensex index. There is a moderately negative correlation between the rainfall index and the Guarex index, and rainfall affects the volatility of the Guarex index. This shows that the rainfall index can be a distinct asset class that can be traded through rainfall derivatives. In order to launch rainfall derivatives in India, NCDEX and Skeymet Industries have already approached the SEBI for permission.
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