The ED and CEO of Reliance Securities says the market is facing huge headwinds of tightening of global liquidity, resulting in compression of valuations.

After the Sensex lost 14% or 5,640 points and Nifty fell 14.71% or 1,730 points in less than two months, investors including Jhunjhunwala booked heavy losses in their portfolios.

And even though both have fallen to 34,000 and 10,200 level from their peak, the growth in India's stock markets is hiding more than it's revealing.

India's rapid-fire attempts to stem the fast depreciating rupee through 5 rounds of higher import tariffs and anti-dumping restrictions since the beginning of this year don't seem to have delivered.

The strong buying activity by DIIs has helped market scale all-time highs this fiscal. But when it comes to Indian markets, contribution of FIIs cannot be ruled out.

The index touched 38,989.65 level, rising 93 points compared to its previous close of 38,896. Yesterday, the Sensex hit an all-time high of 38,920 level intra day. However, gains were trimmed due to profit booking with Sensex at record levels.

The Sensex has gained over 14% since the beginning of this year. The Nifty ,too, has not been far behind. The index is up 11.50% since the beginning of 2018.

While the Sensex hit an all time high of 38,402 rising 124 points from yesterday's close, the Nifty rose 30 points to new peak of 11,581 after climbing 30 points from its previous close.

While the Sensex touchedan all-time high of 38,340 breaching the previous peak of 38,076 reached onAugust 9, Nifty crossed the 11,500 mark for the first time ever to hit a newhigh of 11,565 level. 

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Lack of FII inflows and growing oil prices are also affecting the rupee, a PSU bank official said. Foreign investors sold shares worth Rs 971.8 crore on a net basis, provisional exchange data showed.

While the Sensex closed 221 points higher at 37,887, the Nifty gained 60 points to close at the 11,450 level. Market heavyweight Reliance Industries added 35 points to close at 1217.

The Sensex reached a record 37,061 level, surpassing its all time high of 36,902 hit on July 24. The Nifty breached its previous record high of 11,171 level reached on January 29 earlier this year.

There are already fears of trade wars escalating to currency wars among countries.

Continuing their selling spree, foreign investors have pulled out nearly Rs 1,200 crore from the debt markets in the first two weeks of the month on higher fuel prices and possibilities of rate hike by the US Federal Reserve.

Have markets become more volatile or are they witnessing a minor correction that will bring the stocks down to comfortable valuation levels?