Cotton futures in India are expected to fall this week on a decline in buying from millers and a slowdown in export of raw cotton at higher prices, while a weak overseas market is also seen weighing on sentiment.

Weather is improving in the leading cotton cultivating areas and could aid harvesting. Harvested cotton in India, the world's second-largest grower, typically starts arriving in local markets from October.

"Prices are very high. Millers are hesitating to buy at such high prices. Exports of raw cotton have also slowed down at these prices," said Manu Mangaldas Shah, a trader from Ahmedabad, a key market in Gujarat. Concerns over changes in China's stockpiling policy, which is seen curbing demand, is hurting sentiment, traders said.

China is preparing the ground to scrap a controversial scheme to stockpile cotton in favour of subsidising farmers, a move that could slash imports by the world's top buyer of the fibre and herald a broad shake-up of Beijing's sensitive farm policies.

The most-active October cotton contract ended 0.84 percent down at 22,500 rupees per bale on the Multi Commodity Exchange. It hit a record high of 23,740 rupees on Aug 28.

However, exports of cotton yarn remained robust due to demand from China, Japan and Europe. Trade commitments for cotton yarn exports rose 48 percent in July from a year earlier, data from the Director General of Foreign Trade showed.

The Cotton Association of India (CAI) has forecast a 4.5 percent rise in output to 37.2 million bales of 170 kg each in the year beginning October 2013 on hopes of better yields.

As on Aug. 29, farmers have planted cotton on 11.17 million hectares, down from 11.28 million hectares a year earlier, the farm ministry has said.

The most-traded domestic spot Shankar-6 variety was steady at 48,500 rupees per candy of 356 kg, data from the Cotton Association of India showed.

The Cotton Corporation of India (CCI) auctioned 22,800 bales on Monday. In the previous week, 73,700 bales were auctioned. In New York, the December cotton contract on the Intercontinental Exchange was up 0.42 percent to 83.59 cents per lb at 1242 GMT.