Market may track weak Asian stocks

The market may edge lower tracking weakness in Asian stocks as a proposed $700 billion bailout deal for the US financial sector stalled in Washington. The market sentiment has been hit by a sustained selling by foreign institutional investors.

Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 0.6% to 2.4%.

The US Congress struggled to find agreement on modifying the Bush proposal to attack the housing market crisis. The Bush administration, last week, proposed a $700 billion financial rescue package, aimed at staving off the collapse of the US financial system. Meanwhile, a group of conservative Republican lawmakers proposed an alternative mortgage insurance plan.

In a major development, JPMorgan Chase acquired the banking assets of Washington Mutual late on Thursday, 25 September 2008, after the troubled thrift was seized by federal regulators, marking the biggest bank failure in the United States and the latest stunning twist in the ongoing credit crisis.

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. Early this week Goldman Sachs Group Inc and Morgan Stanley became bank holding companies after investors last week lost confidence in their freewheeling, high-risk broker model.

Back home, inflation remained steady, the latest data showed. Inflation based on the wholesale price index rose 12.14% in 12 months to 13 September 2008, unchanged from the previous week's annual rise, government data released after trading hours on Thursday, 25 September 2008, showed. Inflation for the week ended 19 July 2008 was revised upwards to 12.54% from 11.98%.

As per provisional data released by the stock exchanges, foreign funds sold shares worth a net Rs 1050.38 crore on Thursday, 25 September 2008. Domestic funds bought shares worth a net Rs 605.59 crore.

Foreign institutional investors (FIIs) have been pulling out their investments from India and other emerging markets to shore up resources to beat the global liquidity crunch. In India, FIIs sold shares worth a net Rs 7357.20 crore this month (till 24 September 2008). The outflow has reached Rs 35871 crore in calendar year 2008.

Meanwhile, the odds of the US-India civil nuclear cooperation agreement being approved by the US Congress improved on Thursday, 25 September 2008, when a key lawmaker embraced a bill to end the three-decade ban on nuclear trade with India. House of Representatives Foreign Affairs Committee Chairman Howard Berman introduced a bill to approve the deal identical to Senate legislation, dropping his own competing version and eliminating any need to reconcile the two