India Ratings has revised its outlook on the cotton sector upwards, from negative to 'negative-to-stable' this fiscal.
The agency has also revised the rating outlook on cotton companies to "stable" this year from "negative", due to a revival in domestic yarn production for exports and favourable government policies which helped stabilise cotton prices at a higher level, which would stabilise credit profile of cotton companies.
For this fiscal, cotton prices are likely to remain stable at current levels, the agency said.
Also, a spurt in demand from Pakistan, Bangladesh, Turkey and Vietnam is likely to offset lower cotton demand from China. Additionally, the agency report expects revival seen in domestic production in April-November last year to continue this year.
The Cotton Corporation expects domestic cotton production to be at a decade's high at 37.5 million bales this year due to favourable monsoons and higher acreage.
The rating agency, however, said that adverse weather developments in January 2014 would lead to lower output for the current marketing year (October-September).
