Cotton on MCX settled up by 0.29% at 20520 on short covering after prices dropped as arrivals have improved in the physical market. About 185.9 lakh bales of cotton have arrived in the domestic market. Maharashtra is leading the arrivals figures at 51 lakh bales followed by Gujarat at 42 lakh bales. Moreover, India has exported around 2.5 million bales so far in the 201617 season that started on Oct. 1. In 201516 India exported 6.9 million bales, but this year exports could fall 28 % to 5 million bales. India's cotton arrivals falls 5% to 12.83 million bales until Jan 19 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. 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 short covering as market has witnessed drop in open interest by -16.15% to settled at 3966 while prices up 60 rupees, now Cotton is getting support at 20414 and below same could see a test of 20307 level, And resistance is now likely to be seen at 20584, a move above could see prices testing 20647.

Trading Ideas

# Cotton trading range for the day is 20307-20647.

# Cotton prices gained on short covering after prices dropped as arrivals have improved in the physical market.

# Maharashtra is leading the arrivals figures at 51 lakh bales followed by Gujarat at 42 lakh bales.

# According to CFTC, net long stance in cotton is up by 3,611 lots to 114,179 lots, which highest ever, according to records dating back to 2006.

# Cotton prices in spot market dropped by 180.00 rupees and settled at 20210.00 rupees.