<p><font size="5">高盛高华-GS INDIA LIMITATIONS ON ODIS </font></p><p><font size="5">October 17, 2007&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10页<br/>Asia Pacific: Portfolio Strategy<br/>India: Limitations on ODIs<br/>Incremental negative; maintain positive stance</font></p><p>&nbsp;</p><p><br/></p><p>SEBI proposes limiting P-notes<br/>The Securities and Exchange Board of India is proposing to limit or curtail<br/>offshore derivative instruments, which include participatory notes that are<br/>an important mode of foreign investor access to local equities.<br/>Worst case foreign selling: about US$47bn<br/>We estimate the worst case net foreign selling at US$47bn or about 4% of<br/>market cap. However, we think actual net selling may be much less than<br/>this and will likely transpire over an extended period.<br/>Incremental negative; retain positive strategic stance<br/>This announcement is an incrementally negative liquidity event, because it<br/>limits new inflows from foreign investors without FII status and may<br/>encourage foreign selling. However, we maintain our positive strategic<br/>stance based on strong macro and corporate earnings growth and ample<br/>domestic liquidity. Valuations are high, but are likely to remain so given<br/>growth prospects.<br/>Implementation ideas<br/>We highlight our analysts’ Buy-rated stocks and a zero-cost upside option<br/>strategy.</p>