July 2, 2012 / 12:13 PM / 5 years ago

OUTLOOK-India's kapaskhali to fall on profit-taking

MUMBAI, July 2 (Reuters) - Indian cottonseed oilcake, or kapaskhali, futures are likely to fall this week as traders may opt to cash out gains after a recent rally in prices while higher delivery pressure is also seen weighing on sentiment.

On Monday, the most active August contract on the National Commodity and Derivatives Exchange ended 0.52 percent down at 1,331 rupees per 100 kg. It has risen more than 11 percent in June.

Kapaskhali, is a by-product of cottonseed and used as cattle feed mostly in the north-western states of India.

"A correction was due as prices had been going up since last three weeks. At the same time pressure of higher delivery is also weighing on sentiment," said Chowda Reddy, senior analyst at JRG Wealth Management.

FED stock of around 48,500 tonnes of cottonseed oilcake is expiring on August 5, the data from NCDEX showed.

Reddy expect the August contract to fall to 1,280 rupees by the end of this week.

At Akola, a key market in Maharashtra, cottonseed oilcake fell 4 rupees to 1,299 rupees per 100 kg.

Increased availability of grass during the monsoon could also drop the demand for cottonseed oilcake in the physical market. Grass is an easily available and almost free of cost alternative to cottonseed oilcake.

However, concerns over delayed monsoon rains and expectations of a decline in cotton acreage due to lower returns, could restrict the losses.

For the week ended June 27, rains were below average and failed to cover as much of the country as they should have, the weather office said, fanning concerns about output of crops despite reassurances from weather officials.

The area under cotton cultivation in India could fall up to 10 percent in the 2012/13 season beginning October as lower returns in 2011 may prompt farmers to switch to other crops. (Reporting by Meenakshi Sharma; Editing by Anand Basu)

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