Further to the downtrend in the prices of cotton, the Research Analyst of Geofin Comtrade, Ms. Pallavi Munankar has shared her view.
International Cotton: ICE Cotton May futures witnessed a sharp fall to hit a six and a half year low of 57.26 cents per pound in this mid-week. Prices came under pressure due to concern with respect to any announcement from China's state reserve, about its plans to auction off from its huge inventory. Moreover, demand concerns from world's top consumer China after the official customs data which showed that the country's cotton imports witnessed a drop of more than 40 percent on year to stand at 95,588 tonnes in January, also acted as a negative factor for prices. In addition to this, strength in US dollar index, continuous hike in exchange inventory levels along with weakness in financial markets also exerted further downside pressure on fiber prices.
Domestic Cotton: Taking cues from fall in international prices and weakness in physical markets, MCX Cotton March futures also witnessed losses this week and touched a low of Rs.16,090/bale. In the short term perspective, cotton prices are expected to trade higher as buying at lower levels is expected to support prices. Demand in physical markets and rise in overseas prices will also helped prices to move higher. Rupee movement will also play a crucial role to provide direction to fiber prices. However, traders will keep a close watch on any announcement from China regarding to the reserve sale, which will act as a trend reversal in the market.