IN A NUTSHELL :

Some of our key expectations from Budget 2001-02 are:

-Cut in small savings rate.

-Steps for improving finances of state electricity boards to improve viability of IPPs.

-Steps for increasing business confidence with a view to increasing capital expenditure by existing companies. This is likely through a dilution of the SICA Act and stronger strictures for bouncing of cheques.

-Firming up an exit policy to facilitate business restructuring.

-Providing a boost to the agriculture sector through better percolation of benefits.

-Boosting capital markets through:

1. An alteration of the MAT, which would facilitate reduction in dividend tax without affecting corporate tax collections.

2. Approval of an equivalent of the 401K scheme thus aiding greater inflows in the market.

3. Showing greater clarity in the disinvestment policy.

The key beneficiaries would be:

-Capital Intensive industries and core sector industries due to a spurt in demand and a lowering of marginal cost of funds.

-MNCs and aggressive domestic players who are in a position to take advantage of a more liberal labour policy.

-Companies which are focussed on the rural market for their offtake.

-Fundamentally undervalued stocks as we expect a rally in the Sensex due to better returns vis a vis deposits, fresh inflow of funds through 401K type schemes and the creation of a groundwork for absorbing disinvestment paper.

The best picks therefore are:

-Fundamentally sound cement counters and TISCO.

-Glaxo, E.Merck, Pfizer, Knoll Pharma, Fulford and Godrej Soaps for their aggressive personnel restructuring programmmes.

-Ranbaxy Labs, Glaxo, HLL, Nirma, Colgate Palmolive and Godrej Soaps for their focus on the rural markets

-PSU counters like VSNL, HPCL BPCL, IBP, MTNL, HCI.

The Research Report has been prepared by the Equity Research Division of Khandwala Securities Limited on behalf of its itself, Khandwala Finances Limited, Jayantilal Khandwala and Sons Pvt. Ltd., Falcon Brokerage Pvt. Ltd. for private circulation only. The document does not constitute to buy or sell any securities mentioned herein. While utmost care has been take to present the above data, the company does not accept any responsibility for its accuracy. KSL/ KFL shall in no way be liable for any direct or indirect losses arising from the information provided, hence informing investors to act at their own risk. KSL and its associate companies may provide investment banking or any other financial services to the company covered in this report.