Into the abyss

The market is set to tumble today, 10 October 2008, on worries about a global recession despite worldwide central bank measures to stave off a crisis. Bank bailouts, liquidity injections and interest rate cuts across the world have failed to quell investor anxiety with Asian stocks tumbling today, following overnight setback in US stocks. Infosys Technologies, which reports its quarterly earnings before trading begins, will be in focus.

Japan’s Nikkei 225 average was down 10.6% at 974.12. In other Asian shares, key benchmark indices in Hong Kong, South Korea, China and Singapore were down 5% to 7%.

Overnight, US stocks slumped more than 7% on fears that credit markets would stay frozen, paralysing the world's financial system and slowing economies to a standstill.

At the centre of a financial crisis now almost a month old, credit markets remained in deep distress. With banks desperate to protect capital, the interbank cost of borrowing dollars rocketed. Three-month interbank rates for dollar loans hit their highest level of the year.

The cost of protection against defaults in Asia's sovereign and corporate debt also soared to record highs on Friday, 10 October 2008, on fears financial crisis would spread to the region.

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 8278.10 crore last month. The outflow has reached Rs 39707.10 crore in calendar year 2008 (till 7 October 2008).

As per provisional data released by the stock exchanges, foreign funds sold worth a net Rs 1055.51 crore on Wednesday, 8 October 2008. Domestic funds bought shares worth a net Rs 1083.56 crore.