Within the FMCG universe, Dabur, Britannia, GCPL, Radico, Emami, and Nestle outperformed, clocking revenue growth of 14/12/11/11/11/10% YoY respectively. Growth in packaged food and hygiene moderated, although it continued to remain strong, following reduced fear among consumers and easing of restrictions. Discretionary demand witnessed substantial sequential improvement as increased economic activity and more instances of going out lifted sentiments. Rural growth has been ahead of urban due to lower restrictions, migration of labour & capital and healthy agri economy. We expect rural will remain strong in 2HFY21. However, we remain cautious and selective within the sector due to the unfavourable medium-term risk-reward, given modest absolute growth relative to expectations and valuations. Despite defensive characteristics, we are underweight on the sector in our model portfolio. We recommend BUY on ITC and ADD on UNSP, Colgate and Radico. The HSIE Consumer-Index sales indicated recovery with a growth of 1% YoY in 2QFY21 (+6% in 2QFY20 and -23% in 1QFY21) as easing of lockdown and resumption of economic activity supported demand. The three-year CAGR (which normalises all base adjustments over the past three years) in 2QFY21 was +7% YoY, supported by the healthy growth in the past two years. Categories that outperformed our index in 2QFY21 are OTC FMCG, F&B;, Oral Care, Paints, and Haircare, clocking 50/13/8/6/5% YoY growth. The divergence between the underperforming and outperforming categories narrowed sequentially as growth in essentials moderated and discretionary demand saw improvement. QSR, Footwear, Liquor and Dairy categories were impacted the most, contracting by 30/27/16/3% YoY.