The stock market will remain wobbly as it heads into a new week, carrying over the last week's confusion surrounding the proposed new curbs on participatory notes (P-notes or PNs).

However, a video conferencing between the Securities and Exchange Board of India and leading foreign investors after the close of trade on Monday might provide the much-needed clarity and, hopefully, bring stability back to the markets, said dealers.

Dealers anticipate a further slide in stock prices, given the recent frenzied rally. Cues from the US, where the Dow lost 367 points on Friday, is also expected to add to the negative sentiment.

Proposals to curb rising inflows into stock markets through P-notes triggered a sell-off in the stock markets last week. The Sensex, which gained 36 per cent since the lows of mid-August, corrected by nearly 8 per cent last week after hitting a new record of 19,051.

P-notes, an offshore derivatives instrument, which has Indian stocks as underlying, are issued by FIIs to anonymous overseas investors. More than 30 per cent of the inflows into the country's capital markets are through the P-notes route.

Besides, if the dollar continues to fall, one could see more inflows as foreign investors buy shares in India as a hedge against the US currency. The rupee closed at 39.74 against the dollar on Friday, down 0.062 per cent. The currency had appreciated 10 per cent since late 2006.

Second quarter results announced by many companies this week have not been very stunning, though it is in line with market expectations. Reliance Industries [Get Quote], the country's most valuable company, posted a 28 per cent increase in profits.

However, software companies bore the brunt of the rising rupee as Infosys [Get Quote] results failed to keep up with analysts' expectations. The upcoming week will see other IT majors such as HCL [Get Quote] and Satyam [Get Quote] along with heavyweights Tata Steel [Get Quote] and ITC announcing their second quarter results.

The Sebi, at its board meeting on Thursday, will decide how to curb the $88 billion P-notes investments. Foreign investors unwound Rs 14,000 crore worth exposures into stocks and derivatives positions in the last three days.

With the markets already absorbing the pain, some commentators expect the Sebi to go ahead with the P-notes move.

HDFC [Get Quote] Chairman Deepak Parekh welcomed the P-notes proposal, saying the huge inflows through the instrument was a cause of concern. "The BPO industry is operating at thin margins of 10-15 per cent. A further appreciation of the rupee will render several people jobless," he told reporters, on the sidelines of a seminar on Friday.

Sashi Bhushan, the head of equities at IL&FS Investsmart said: "There is some more pain left for the market. We will see stability at 16,000-16,500 levels. We could see some buying coming at those levels."

Market participants also fear that margin calls may get triggered on Monday, if there is further unwinding of positions by FIIs.

Margins calls are triggered when brokerage houses (and stock exchanges, in extreme situations) unwind their clients leveraged exposures in the market to meet margin requirements when prices fall sharply.