As the chart shows, most auto stocks are much higher and the BSE Auto index is 40% higher than where it was on 9 May 2008 and 25% higher than on 24 September 2007.

Of course, not every firm has done well—Tata Motors Ltd is a clear exception—but most auto stocks have benefited from the lower interest rates. That goes for bank stocks as well, with the BSE Bankex higher now than it was on 9 May 2008 or on 24 September 2007. Earnings, too, have risen since then, so the market is actually much cheaper.

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At the other end of the spectrum we have the realty stocks, which are much lower today, despite being up sharply from the bottom. The BSE Realty index is still 43% lower than where it was on 9 May 2008 and 52% lower than its level on 24 September 2007.

Graphics: Sandeep Bhatnagar / Mint

EPFR Global points out three quarters of the money that flowed into money market funds in 2008 have now flowed out, which means there’s still some upside left for liquidity-driven inflows. But much of that money may not in fact come into emerging market equities at all, because it has started to go into the developed equity markets and to bonds as investors start to get worried about high equity valuations. (As proxies to developed market demand, money has already started flowing to IT stocks.)

In spite of high valuations, one countervailing factor for Indian equities may be the rotation away from China. EPFR Global says that investors have been moving out of China into India and Korea.

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