English and Dutch traders decided to establish settlements in Masulipatnam (now known as Machilipatnam) for several reasons:

1. Strategic Location: Masulipatnam was located on the eastern coast of India, making it an ideal location for trading with the Indian subcontinent and Southeast Asia. It had a natural harbor that provided easy access to the Bay of Bengal, which facilitated trade with other countries.

2. Trade Opportunities: Masulipatnam was a bustling trading center with a well-established network of merchants and traders. It was known for its textile industry, especially the production of cotton fabrics. The English and Dutch saw great economic potential in trading these goods.

3. Competition with Portuguese: The Portuguese had already established a strong presence along the western coast of India, particularly in Goa and Calicut. The English and Dutch wanted to challenge Portuguese dominance in the region and establish their own trade networks.

4. Access to Spices: The English and Dutch were primarily interested in acquiring valuable spices such as pepper, cloves, and cardamom, which were in high demand in Europe. By establishing settlements in Masulipatnam, they hoped to gain direct access to spice-producing regions in Southeast Asia.

5. Political Stability: Masulipatnam was under the control of the Qutb Shahi dynasty, which provided a relatively stable political environment for the European traders. The English and Dutch sought permission from the local rulers to establish their settlements and carry out trade activities.

Overall, the decision to establish settlements in Masulipatnam was driven by economic opportunities, strategic location, competition with the Portuguese, and the availability of valuable commodities like textiles and spices.