Market likely to see firm start

Key benchmark indices are likely to open higher today, 17 September 2008 tracking positive global markets boosted by the US Federal Reserve’s bailout package for the beleaguered American International Group (AIG). The Federal Open Market Committee decided to keep its target for the federal funds rate at 2%.

The Fed said that the strains in financial markets have increased significantly and labour markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending.

The US Federal Reserve in a meeting on Tuesday, 16 September 2008 announced an $85 billion rescue plan to help American International Group in exchange for a 79.9% stake. The deal would avoid the biggest corporate bankruptcy ever and follows a government bailout of mortgage lenders Freddie Mac and Fannie Mae earlier this month

Meanwhile, Barclays has agreed to acquire US fourth largest investment banking firm Lehman Brothers’ North American investment banking and capital markets businesses. Barclays said it would acquire trading assets with an estimated value of 40 billion pounds and trading liabilities worth 38 billion pounds. It will also acquire Lehman's New York headquarters.

US light crude for October 2008 delivery gained $3.15 to $94.30 a barrel today, 17 September 2008 as an $85 billion bailout of American International Group sparked a relief rally on Wall Street.

Asian markets were trading mixed today, 17 September 2008. Japan's Nikkei rose 2.08% or 241.06 points at 11,850.78, Hong Kong's Hang Seng was up 1.55% or 282.87 points at 18,583.48, Taiwan's Taiwan Weighted gained 2.09% or 120.59 points at 5,877.18, and South Korea's Seoul Composite surged 3.05% or 42.34 points at 1,430.09. However, China's Shanghai Composite declined 0.13% 2.50 points at 1,984.13 and Singapore's Straits Times was down 0.92% or 22.88 points at 2,463.67

US markets rallied on Tuesday, 16 September 2008 as markets digested the news of the Fed holding rates with the point that the Fed had hedged its options for the future. The Dow Jones Industrial Average surged 141.51 points, or 1.30%, to 11,059.02, the Standard & Poor's 500 Index rose 20.87 points, or 1.75%, to 1,213.57 and the Nasdaq Composite index climbed 22.45 points, or 1.03%, to 2,202.36.

Back home, buying in index pivotals coupled with short covering after five straight days of fall helped key benchmark indices erase sharp early losses on Tuesday, 16 September 2008 in highly choppy session. The BSE 30-share Sensex slipped 12.47 points or 0.09% at 13,518.80 and the S&P CNX Nifty rose 2 points or 0.05%, to 4074.90, on that day.

The BSE Sensex is down 6768.19 points or 33.36% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 7687.97 points or 36.25% below its all-time high of 21,206.77 struck on 10 January 2008.

Foreign institutional investors (FIIs) were net equity sellers worth Rs 1303.41 crore while mutual funds bought shares worth Rs 612.36 crore on Tuesday, 16 September 2008, according to provisional data on NSE. FIIs were net buyers of Rs 1053.14 crore in the futures & options segment on that day.

Meanwhile, the Reserve Bank of India (RBI) on late Tuesday, 16 September 2008 stepped in with measures to support the rupee — which has been battered to almost 47 against the dollar — and supply cash in the money market. The move will increase dollar supply and lower banks’ borrowing cost in the overnight call money market. RBI has hiked the maximum interest that banks can pay on NRI deposits by 50 basis points for dollar as well as rupee deposits.