Market may extend gains

The market may edge higher extending Friday’s (19 September 2008) solid surge on hopes for the $700 billion bank bailout proposed by the United States over the weekend to tackle the US financial crisis. Stocks rose in Asia today, 22 September 2008, boosted by the US package. Key benchmark indices in Hong Kong, Japan, China, South Korea, Singapore and Taiwan were up by between 0.24% to 6.4%.

According to the US administration's proposal, the federal government would buy up as much as $700 billion of illiquid mortgage assets at a deep discount from banks. The Treasury Department would run the program directly, unlike the savings and loan crisis of the 1990s when Congress created the Resolution Trust Company to spearhead a financial bailout. The $700 billion plan, the most sweeping intervention in the financial markets since the Great Depression, is aimed at stemming the credit crisis roiling Wall Street and threatening the global markets.

Stocks across the global had risen sharply late last week after regulators and central banks across the globe came to the rescue of the battered markets. On Thursday, 28 September 2008, major central banks around the world announced a series of measures to improve dollar liquidity in money markets. UK on Friday, 19 September 2008, announced a four-month ban on short-selling of financial stocks. In US, the Securities and Exchange Commission announced a temporary ban on short selling of 799 financial stocks effective Friday, 19 September 2008.

A deep financial crisis engulfed the global markets last week when the US investment banking giant Lehman Brothers filed for bankruptcy, Merrill Lynch was bought over by Bank of America in a distress sale and the world's largest insurer AIG had to seek US government help to thwart an imminent collapse.

As per provisional data released by the stock exchanges, foreign funds bought shares worth a net Rs 1016.18 crore on Friday, 19 September 2008. Domestic funds bought shares worth a net Rs 43.91 crore. The BSE 30-share Sensex jumped 726.72 points or 5.46% to 14,042.32 on Friday, 19 September 2008.

Foreign funds pressed sales worth a net Rs 7594.40 crore this month (till 18 September 2008). Their cumulative outflow in calendar 2008 reached Rs 36108.20 crore.

In the near term, the domestic bourses will also eye developments on the Indo-US nuclear deal front. US Undersecretary of State William Burns on Thursday, 18 September 2008, urged members of the US Congress to approve a US-India nuclear cooperation agreement before the House and Senate adjourn ahead of November 2008 elections. However, some US lawmakers have strong concerns about the pact, chiefly that the extra fuel the accord provides could boost India's nuclear arsenal by freeing up its domestic uranium for weapons.