August 21, 2012 / 11:33 AM / 5 years ago

OUTLOOK-India cotton seen stable, lower demand matches tight supplies

MUMBAI, Aug 21 (Reuters) - Cotton prices in India are likely to remain stable this week as a tight supply situation in the spot markets could outweigh improvements in rains and lower buying by mills.

On Tuesday, the most traded Shankar-6 variety closed up 200 rupees to 38,400 rupees per candy of 356 kg, data from Cotton Association of India showed.

At 1116 GMT, the key August cotton contract on the Multi Commodity Exchange (MCX) was trading up 0.22 percent at 17,830 rupees per bale of 170 kg each on Tuesday.

"Mills, waiting for new crop arrival, have slowed down purchase, but it is unlikely to have much impact on prices as stocks available with traders are very low," said Arunbhai Dalal, a trader based in the western state of Gujarat, top grower of the fibre.

Cotton price rose over 16 percent since June 1 on fears that scanty rains could trim acreage.

Recent spell of good rains in Andhra Pradesh, Maharashtra and Northern India, has eased the fear of steep fall in the fibre harvesting in the next season beginning on Oct. 1.

Most farmers in India plant cotton in the months of June and July with the arrival of the monsoon season and begin harvesting after October.

Hopes of improvement in supplies as the new cotton crop from northern India reaches the market in the second half of next month capped the upside movement in prices, Dalal said. (Reporting by Deepak Sharma; Editing by Anand Basu)

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