Indian stocks may continue to be influenced by movements in global indices amid impasse over the proposed $700 billion bailout deal for the US financial sector. Sustained selling by foreign institutional investors will weigh on the domestic bourses.

The US Congress on Thursday, 25 September 2008 struggled to find agreement on modifying the Bush proposal to attack the housing market crisis. The Bush administration, on 19 September 2008, 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.

A financial crisis engulfed the global markets earlier this month with the US investment banking giant Lehman Brothers filing for bankruptcy, Merrill Lynch being bought over by the Bank of America and the US government bailout of American Insurance Group (AIG) for $85 billion in turn of 80% stake.

The market sentiment has been badly hit by a sustained selling by foreign institutional investors (FIIs). They 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 8,061 crore (till 25 September 2008). FII outflow reached Rs 36,574.90 crore in calendar 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.

Q2 September 2008 results is the next major trigger for the market. IT bellwether Infosys Technologies will kickstart the earnings season when it unveils its Q2 September 2008 results on 10 October 2008. Analysts opine that with the dollar appreciating sharply against other currencies, including the euro and the pound, most IT pivotal may miss their dollar revenue guidance. Foreign brokerage CLSA said in its recent research note to clients that Infosys may not be able to meet its dollar guidance for the second quarter and the full fiscal.

Derivative contracts for September 2008 series expired on Thursday, 25 September 2008, with lower rollovers. As per reports, marketwide rollover of positions from September 2008 series to October 2008 series declined to 76% as against 83% seen in previous expiry. Similarly Nifty rollover was also lower at 63% as compared to 75% seen in last expiry.

On the macro-economic front, 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 on Thursday, 25 September 2008, showed. Yet further monetary tightening by the Reserve Bank of India (RBI) cannot be ruled out as inflation is way above its target level of 7% towards the year ending March 2009.

The sharp fall in oil prices from a record high of $147.27 a barrel struck on 11 July 2008 augurs well for the global economy. NYMEX crude for November 2008 delivery was hovering at $106.70 a barrel on Friday, 26 September 2008, after falling to sub $90 a barrel earlier this month.