Cotton prices plunged to settle at Rs 21,380 per bale on April 16 as participants reduced their positions as seen from the open interest. The natural fibre extended decline to close at day’s low tracking muted global trend.
It ended the week with a loss of Rs 470 or 2.15 percent on the domestic bourse. Cotton prices rose in three out of the five trading sessions on the MCX.
The agri commodity has been trading higher than 20, 100 and 200 days’ moving averages but lower than the 5 and 50 days’ moving average on a daily chart. Momentum indicator Relative Strength Index (RSI) is at 47.59 which indicates weak movement in the prices.
The US Department of Agriculture has scaled down the global cotton ending stock estimate for 2020-21 (August-July) to 93.5 million bales from 94.6 million bales pegged in March. The downward revision in stocks is mainly due to lower production and higher consumption estimates.
“Fundamentally for the month ahead, we expect MCX Cotton futures to continue to trade bullish as CCI is planning for 90 lakh bales total exports in the coming month with a revival of demand from China and Bangladesh. Moreover, since we are in the post-harvest season the arrivals have started to decline from 3 lakh bales to 1.25-1.75 lakh bales on a daily basis,” said Sunand Subramaniam, Senior Research Associate at Choice Broking.
He said as the demand is increasing the traders are offering a better price than the CCI and are purchasing cotton from farmers. With the ongoing semi-lockdown situation in various parts of India and strict curfew in Maharashtra, there has been a report of supply tightness and panic buying in the domestic market.
The ending stocks are now forecast at 3.9 million bales, equivalent to 22 percent of total disappearance. Overall, we expect a bullish trend in MCX Cotton futures for the month ahead, Subramaniam noted.
In the futures market, Cotton for April delivery touched an intraday high of Rs 21,900 and an intraday low of Rs 21,380 per bale on the MCX. So far in the current series, the commodity has touched a low of Rs 20,340 and a high of Rs 22,760.
Cotton futures for April delivery declined Rs 400, or 1.84 percent to settle at Rs 21,380 per bale with a business turnover of 5,761 lots. The same for May contract fell Rs 380, or 1.72 percent to Rs 21,720 per bale with a business volume of 3,402 lots.
The value of April and May’s contracts traded on April 16 was Rs 71.20 crore and Rs 52.05 crore, respectively.
US Cotton futures end with a loss 1.67 percent to trade at 83.60 cents/pound on Intercontinental Exchange (ICE).
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