Cotton on MCX settled up by 0.84% at 20520 on reports that the supplies may increase as the prices have touched higher levels this season. However, Cotton Association of India (CAI) has revised its cotton crop estimate downward at 341 lakh bales (each of 170 kg) for the year 2016-17 as against the earlier estimate of 346 lakh bales, projected in October. Cotton supplies in Indian spot markets fell 15.9% from a year earlier to 10.8 million bales between October and December as the government's move to scrap high-value currency notes disrupted trading. India's cotton arrivals falls 5% to 12.83 million bales on late commencement of supplies though output for the 2016-17 is expected to higher. Last year arrivals till date stood at 13.51 million bales, according to CCI (Cotton Corporation of India) data. Cotton inflow in north India (Comprising Punjab, Haryana and Rajasthan) grew to 2.67 million bales from 2.18 million bales a year ago. Maharashtra and Madhya Pradesh cotton arrivals recorded marginal rise but in Gujarat fell 13.7% to 27.75 million bales. Cotton arrivals in Telangana slipped 33% to 1.74 million bales until Jan 19. Apart from this, farmers are also holding the stocks expecting prices to rise in the coming months, source added. Cotton Advisory Board (CAB) projected India's 2016-77 cotton output at 35.1 million bales as against 33.8 million bales a year ago. Technically market is under fresh buying as market has witnessed gain in open interest by 0.6% to settled at 8844 while prices up 170 rupees, now Cotton is getting support at 20320 and below same could see a test of 20120 level, And resistance is now likely to be seen at 20650, a move above could see prices testing 20780.

Trading Ideas

# Cotton trading range for the day is 20120-20780.

# Cotton prices dropped on reports that the supplies may increase as the prices have touched higher levels this season.

# However CAI has revised its cotton crop estimate downward at 341 lakh bales for the year 2016-17 as against the earlier estimate of 346 lakh bales.

# India's cotton arrivals falls 5% to 12.83 million bales on late commencement of supplies

# Cotton prices in spot market dropped by 230.00 rupees and settled at 20420.00 rupees.