BSE Sensex to fall after U.S. bailout fails

The Bombay Stock Exchange (BSE) building is seen in this May 2006 file photo. The BSE Sensex is set to open sharply lower on Tuesday after U.S. lawmakers rejected a $700 billion package to end financial panic, knocking down markets in Asia and on Wall Street.

NEW DELHI (Reuters) – The BSE Sensex is set to open sharply lower on Tuesday after U.S. lawmakers rejected a $700 billion package to end financial panic, knocking down markets in Asia and on Wall Street.

Fear gripped markets as investors dumped emerging market assets, sought stability in government debt and confronted the prospect that the crisis of confidence in the bank industry will persist, further damaging the global economy.

The U.S. S&P 500 index suffered its biggest fall since 1987 stock market crash and Asian bourses fell 4 to 7 percent.

The BSE Sensex should open 3 to 4 percent lower and trend downwards, traders said.

"There is a problem of liquidity. There's a feeling that stocks will go further down," said Ambareesh Baliga, vice president at Karvy Stock Broking.

The 30-share main BSE index fell 3.87 percent on Monday to 12,595.75, its lowest close since July 16 and its second-lowest finish this year, taking its losses in 2008 to almost 38 percent.

By 0324 GMT, Japan's Nikkei was down 4.6 percent touching a three-year trough, while MSCI's measure of other Asian stocks fell 3.7 percent.

Nifty futures traded in Singapore were down 3.7 percent.

STOCKS TO WATCH

* Mahindra & Mahindra Ltd after the firm's subsidiary Mahindra Holidays & Resorts Ltd said it was adding 750 rooms at an investment of 3.5-4 billion rupees.

* RPG Cables Ltd after the optical fibre and power cable maker said it issued 6.1 million shares to Deutsche Bank AG at 46.30 rupees each.

* Axis Bank after its board approved private placement of $50 million of senior notes under its medium term note programme.

* Drug firm Piramal Life Sciences Ltd, after it said it secured regulatory approval to start phase I, or initial stage, clinical trials on its experimental cancer drug in Canada.