My daughter (aged 8) tries writing stories. She makes lot of spelling and grammar mistakes and always has a dearth of topics. How can I help her to continue her hobby?

That's really great! At this age the story is more important for which you can praise her. When it comes to grammar you can just tell her she has made mistakes but in a way that she won't feel bad. You can also give her story books to read. They will help her imagination to develop! :)