Mumbai: Cotton spot prices in India are expected to remain stable this week after four flat days as higher supplies from the new season crop are likely to meet demand from textile makers.

"Mills have started buying as cotton stocks with them are very low and this could support prices despite higher supplies from the new season crop and poor demand from exporters," said Arunbhai Dalal, a trader based in Ahmedabad, Gujarat.

Cotton prices in India, the world's second-largest producer, have been declining since mid-September on rising supplies in spot markets as the harvest began.

Export demand is also expected to slide as China, the world's largest consumer and India's biggest buyer, is likely to cut imports by over 50 percent as it tries to trim bulging stocks.

India's exports could be just 7 million bales in the 2012/13 year that started on Oct. 1 from a record 12.9 million bales in the previous year.  

However, aggressive buying by mills in the last four days have prevented prices from falling further.

Local textile mills, which were holding off purchases waiting for the new season crop, started buying to meet an anticipated rise in consumer demand during the coming festival season and that could steady prices.

A majority of Indians will celebrate Dussehra this month and Diwali in November. Demand for textiles rise during festivals as Indians tend to buy new clothes during the celebration.

Besides buying by mills, hopes of government intervention to protect farmers' interest are also preventing prices from declining, despite a steep fall in overseas market, Dalal said.

Global prices have been falling sharply on waning world demand and an expected rise in global output, with the December cotton contract in New York down by about 25 percent since April 1, when farmers in the United States start planting.

At 1151 GMT, the contract was trading up 0.41 percent at 72.19 cents per lb.

On Tuesday, the most-traded domestic spot Shankar-6 variety closed marginally up at 33,100 rupees (USD 630) per candy of 356 kg (around 80.4 cents per lb), data from the Cotton Association of India showed.

The October cotton futures contract closed up 1.61 percent at 16,400 rupees (USD 310) per bale on Tuesday. (about 83 cents per lb)

Cotton futures started trading on the Multi Commodity Exchange (MCX) in late 2011, but volumes have been thin and prices volatile.   (USD 1 = 52.6250 Indian rupees) (1 bale = 170 kg)


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