Run up in Equities

The run up in equities over the last 30-40 days has been quite disconcerting to me. The prime reason being the pace and the lack of any change in the ground situation. Many reasons have been floated over the last 2 weeks on the reasons for the run up. One of the reasons have been indications that the Indian Economy is recovering. Three prime indicators that i have read mostly are car sales rising, industrial indexes rising, and rural economy kicking in. Most of the indicators only point to a temporary relief and not true recovery. The pay commission beneficiaries expenses will only lead to temporary spurt in consumption. Rural economy will grow at its own pace and this is definitely not going to be scorching one. Most of these indicators are only pointing to the fact that Indian economy has a minimum growth level below which it can't go. Also one needs to consider the fact that investment by companies is not rising.

My premise is that the run up is primarily global one and the money propping it is a suspect. Lets have a look at the FII investment and mutual data over the last 4 months. The first two months in the year, the net investments made by both the groups were negative,predictably the effect of the lehman crash was yet to wear off. Since March, with the lowering of risk aversion worldwide, the investments started rising. This also heralded the start of the current run up in equities. The stark contrast in the net investments being made by FII and mutual funds stands out in April.The net investment made by FII's in this month was INR 6508 Cr and by mutual funds was INR 38.6 Cr. The difference is too huge to ignore. This data points to the fact that the run up was primarily a FII driven one. Indian markets are just following the worldwide trend and there is no unique factor for attributing the rise to India alone. The month on month growth of MSCI EM index and the NSE both peaked in April.
Unless the source of money which is propping this run up is clear, the sustenance of this run up is a suspect.