The market continued its profit booking from its recent high of 8300 in October 2015. Concerns over a Fed rate hike and subdued domestic and global trade activities continued to loom over market movement. Q2FY16 earnings remained flat across sectors. However, the profitability largely varied from sector to sector on account of lower RM prices. We believe a cyclical recovery in earnings aided by lower input costs and declining interest rates would provide strong operating and financial leverage to sectors like auto, cement and capital goods. Given the rupee depreciation and quality of earnings, we also remain positive on specific IT and pharma names. We continue to maintain our negative bias on metals, infrastructure and real estate. We expect Sensex earnings to grow 7.6% and 20% in FY16E and FY17E to Rs 1462 and Rs 1755 respectively We 1755, respectively. assign a P/E of 16.5x on FY17E Sensex EPS to arrive at a 12 month forward fair value of 29000 with the Nifty reaching 8800 levels.