HDFC Securities expects 2QFY15 will prove to be yet another subdued quarter for FMCG space. ''There is no visible pick up in the demand environment. The gap between urban and rural growth continues to shrink, with rural growth persistently moderating,'' it said.

HDFC Securities expect volume growth for paint companies (esp. Asian Paints and Berger) to be in the range of 8-10% in domestic decorative paints. Further expectations of volume growth are Colgate (+6%), Dabur (+8%), Emami (+10%), HUL (+5%), ITC (3-4% decline) in cigarettes, Nestle (4%), Pidilite (+10%) and Marico (+7%).

''Key RMs (Crude, Palm oil, Menthol, LLP, TiO2, LAB, etc) witnessed a cooling in prices, which will aid gross margins going ahead. Although, the full benefit of benign RMs will be realized in 3QFY15E. Most companies have increased their brand spends with an intention to capitalize on the much anticipated urban revival (we expect recovery in FY16E).''

''As the focus has shifted beyond FY15E, weak 2QFY15 nos. may not lead to a sharp correction. Earnings expectation have factored a moderation of growth in select categories, but valuations seem to completely ignore the emerging risks. We prefer ITC and Emami on account of their earnings visibility,'' it added.

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