Mills in disappointment as Govt indifferent on duty-cut demand
MCX cotton futures extended gains amid frenetic covering from some mils who were running hand to mouth since long. Buyside consumers continuously lobbying from import duty reduction to get some respite from soaring rawmaterial cost. A stakeholders meeting is being called on called off since last three month. Every time market listens such news- a momentarily sell off occur, but later on market bounced back as such meeting fail to produce desire (from Mills/consumer angle) outcome. Textile sector enjoyed nice gold lock period in 2021, but 2022 openeing is not so happy. Several mills are now not in comfortable situation from raw material coverage front. Several yarn makers are also bleeding cash, except higher count premium yarns. Short term technical picture is bullish. We may see wilder bounce and dips as we may soon witness fight between short covering in futures and demand rationing in physical. Cotton candy at 90000 is “candy crush saga!!” Where crush is not romantic but crush is more synonym with oil crushing seed crushing. Just a pun. No offence please.
Cotton market witnessed amazing upside breakout. Short term outlook seems bullish. It looks like a stealth bull market, nature is bipolar hence we may see random yet frequent bouts of buy and sell. Every sharp dips may offer buy opportunity. From historical perspective, current market squeeze looks like similar of 2010-11 squeeze, albeit little less intense. During last squeeze, we have seen too big a backwardation. If not mistaken, backwardation was around 60-80 cent between old crop new crop.
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