MUMBAI, March 20 (Reuters) - Cotton prices in India are expected to rise marginally on hopes that government agencies will step up purchases to support falling prices and on an expected increase in seasonal demand from yarn makers in the next few weeks, traders said.
India, the world's second largest producer and exporter of the fibre, has lifted a ban on cotton shipments imposed on March 5, but stopped registering fresh export orders.
"The government has directed Cotton Corporation of India (CCI) to resort to higher buying to support the falling prices. This could lift cotton prices," said Dheeraj Khaitan, a trader based in Ahmedabad, Gujarat.
CCI has been buying most of the fibre from the western state of Maharashtra so far, but the move has raised hopes for purchases in more areas, said Khaitan.
On Monday, the price of the most traded Shankar-6 variety fell 300 rupees to 33,700 rupees per candy of 356 kg each, data from Cotton Association of India, a traders body showed.
Lower-than-expected arrivals in the spot market could also provide some support to prices, traders said.
Cotton arrivals in domestic spot markets from October 1. to March 11. fell 6.4 percent to 23.73 million bales of 170 kg each versus 25.35 million bales a year earlier, CCI said last week.
India, the world's second largest cotton producer after China, is expected to harvest a record 34 million bales, for the second straight year in 2011/12 ending on September. (Reporting by Deepak Sharma; Editing by Aradhana Aravindan)