MCX Cotton: Buying Recommended
CommodityOnline | Apr 23, 2014 11:51AM ET
In our previous day’s report we had suggested a buy view on US Cotton No.2 both in domestic and global market owing to the fact that the supply could be lower in the West Texas region of the US while domestic demand is also high due to less availability of A grade cotton in the physical market. While we also stated the fact that lower demand in China and global export sales declining could be a hindrance factor for the commodity to trade much higher. Hence, we had also suggested a sell recommendation from higher levels.
However, on yesterday price eventually rose over 1.20% to settle the contract at 93.25 cents/lb. In the similar lines spot prices in India traded higher so the May future at MCX also traded on a positive note by over 2.50% to settle at Rs. 21000/bale. This morning at e-ICE the July contract is seen trading at 93.20 no major change from its previous close while in India the May future at MCX platform is trading at Rs. 21160 up by Rs. 160 from its previous close. We believe so much of gains that are visible in the local market are because spot prices are trading higher in Gujarat market due to less availability of stocks. The A grade stocks (29 mm) quality are continuously managing near Rs. 43000 is likely to keep the underlying higher. For the day and in the short term we believe cotton prices may remain higher. Hence, we recommend buying the future contracts for investing, hedging the physical risk management Spread Analysis: The spread between May and June is currently at Rs. 300 which has been recently trading higher indicating that the near term demand is high for the commodity.
Courtesy: Karvycomtrade
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