Expect Cotton futures to trade higher: Karvy Commodities

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Karvy Commodities report on Cotton

Cotton

Cotton and Kapas futures extended its rally on active buying by millers against  shrinking supply of good quality of cotton stocks. Moreover, rising possibilities of  shifting of area from cotton to pulses in northern region also added bullishness to  cotton futures. Fresh long accumulation  was seen for next month contract at MCX  as open interest increased by about 17.41% whereas prices rose by 0.8% to  Rs.17800/bales of 170 kg each. Similarly, near month cotton contract moved up by  0.75% to Rs.17560/bales yesterday.

Likewise, Spot prices of  cotton also moved up on increasing domestic demand  from millers. Most traded Gujarat S – 6 cotton hovered at Rs.35200 to Rs.35800 per  candy at Rajkot Market. About 12,000 to 15,000 bales of cotton arrived in Gujarat  yesterday.

The Benchmark Kapas contract at NCDEX continued its bullish trend yesterday,  gained 0.22% and closed at Rs.897.50/ 20kg. However, NCDEX near month cocud  contract wiped out most of the gains yesterday in terms of profit booking and  closed at Rs.2228/quintal, down by 0.5% from the previou s close.

At global front, ICE cotton traded on positive bias yesterday as near month contract  rose by 2.54% to 63.01 cent/lb, whereas next month contract settled at 62.45 cent  up by 1.81% against the last trade.

The benchmark of World cotton prices Cotlook A Index closed at 70.05 cent on  Monday, higher by 1.0 % from the previous close.

Outlook

Cotton futures are expected to trade on mixed to higher during today’s session.Active buying from millers amid tigh tening supply of good quality of cotton stocks is likely to support the uptrend of cotton futures. Beside, reports of lower sowing of cotto n in  northern amid weakening of Indian currency could be other reasons to keep cotton prices strong in coming days. Cotton sowing  has started in northern region and recorded lower so far as farmers are preferring pulses against the cotton due to better re turn  expectations. However, better monsoon expectation in year 2016 – 17 may spur farmers to increase area under cotton  in central  region which may compensate the estimated acreages losses in northern region.

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