OUTLOOK-India cotton seen down on subdued demand, imports

Last Updated: Mon, Mar 11, 2013 12:40 hrs

MUMBAI, March 11 (Reuters) - Cotton prices in India, the world's second-largest producer, are likely to fall this week with traders reluctant to buy at higher prices while demand to release the stocks procured by government agencies could also add to the drop.

Fresh import deals signed by Indian buyers, mainly from West Africa, to retain their competitive edge at a time when stockbuilding and thin spot supplies have pushed domestic prices higher, are also seen weighing on the sentiment.

India's cotton imports could jump by two-thirds to over 2 million bales in 2012/13, a top official said on Mar. 8.

Manikam Ramaswami, TEXPROCIL chairman, said that around 20,000 tonnes of raw cotton had been contracted from Africa during the last 30 days.

The March cotton futures contract on the Multi Commodity Exchange (MCX) ended 1.28 percent down at 18,500 rupees per bale of 170 kg each.

"Cotton prices are seen taking correction this week due to a slowdown in demand at higher prices. The March contract seen falling to 18,300 rupees," said Chowda Reddy, a senior analyst at JRG Wealth Management.

In New York, the most active May contract on the Intercontinental Exchange was down 0.89 percent at 86.11 cents per lb at 1234 GMT.

The U.S. government on Friday cut its forecast of global cotton inventory for the marketing year to end-July due to expectations of higher demand as China, home to the world's No. 1 textile industry, continues to bulk up its strategic stockpile of fiber.

Currently, cotton supplies to spot markets across the country are around 100,000 bales per day, down from 200,000 bales per day at the start of February, according to traders.

India has allowed 8 million bales of exports for the year to Sept. 30, 2013, of which trader estimated around 6-6.5 million bales to have already been shipped. There have been rumours last week that India might introduce an export ban. (Reporting by Meenakshi Sharma; Editing by Bijoy Koyitty)

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