Citigroup said the Satyam scandal has further dented business sentiment in India, which can affect flow of funds from investors in the days ahead.

"With business confidence already at a five-year low, the Satyam scandal has further dented sentiment and cast a shadow on hidden leverage of Indian businesses, especially those that are family-run," its research arm Citigroup Global Market said.

It said this has also had repercussions on the investor-confidence in the economy and could affect flows in the near term. It apprehended that one could see further holes in the system as the downturn worsens, with a total of three of IT firms now barred from World Bank projects, coupled with the resignation of a host of directors and senior officials in the corporate sector.

India has been faring poorly in terms of Transparency International's (TI) Corruption Perception Index, which ranked it at 85 of 180 countries in 2008. In a separate Bribe-Prayers Index, TI ranked India almost at the bottom of the list – at 19th position among 22 countries.

It said closely-held structure of many Indian companies suggest a need for improved transparency and accountability for independent directors. "Apart from improving disclosure standards, re-auditing norms, and greater shareholder activism, there is also a need to counter corruption."

About trends in the forex market, it said given the prevailing uncertainty on the global front and its impact on external financing, the rupee is likely to trade at about Rs 48.5 per US dollar.

Bond market, it said, is expected to ease by 100-150 basic points in the coming months.