The chief executive of India’s National Stock Exchange highlighted concerns around the recent market rally, as stimulus measures continue to prime stocks from New York to New Delhi. 

“It’s a really uncertain world, and nobody really knows how it’s going to develop over the next 12-18 months,” Vikram Limaye told CNBC.

“From that perspective, it does appear that the markets don’t seem to be connected with the ground reality and the uncertainty that actually faces most economies in the world,” he said.

“This is largely liquidity driven,” he added.

Limaye was speaking on a “Future of Derivatives in Emerging Markets” panel hosted by the Saudi Tadawul and moderated by CNBC Wednesday evening.

“At another level, in many markets, the index is not really an indicator of the broader market,” he said. “These indices are largely driven by a handful of stocks that have done exceedingly well,” he added.

“The FAANG (Facebook, Amazon, Apple, Netflix and Google) stocks are driving, I would argue based on some of the data that I’ve seen, 50-60% of the return on the NASDAQ,” he said. “The rest of the stocks, obviously the valuations are quite different.”

The Nasdaq has risen over 22% year-to-date, even as U.S. GDP collapsed in the first and second quarters amid the coronavirus shutdown. The outperformance of tech against a backdrop of dire economic data has even prompted fears that a correction could be coming.

Limaye also highlighted a disconnect in his home market.

“If you look at the Nifty in India, it’s again driven by a handful of stocks that have really appreciated quite a bit, but it’s not necessarily reflective of the broader market,” he said.

The Nifty, or Nifty 50, is one of the two main stock indexes used in India. It represents the 50 largest Indian companies listed on the National Stock Exchange.

“It does worry me,” Limaye said. “There is a lot of liquidity and that is going to find its way into equity markets particularly because in most parts of the world, the fixed income returns are exceedingly low,” he said. 

“In India, as yields have come off and rates keep going down, there is more money flowing into equities and actually you’re seeing money flow into gold as well,” he said, highlighting unusual investor appetite for simultaneous risk and safety. 

Limaye also highlighted a number of risks for stocks for the second half of the year. 

“Whether its monetary stimulus or fiscal stimulus, the sustainability of that obviously is a cause for concern,” he said.

“I also worry about the financial services sector,” he added. “If the financial sector gets into difficulty because of the underlying problems with the real economy, that is also a cause for concern because the financial services sector is exceedingly critical for the overall health of the economy.”

In the commodities space, Limaye said lower for longer oil prices would ultimately benefit India.

“70% of our import bill is related to oil, so low oil prices are certainly a huge positive from an Indian economy perspective,” he said. “It’s hard to make the case that oil prices will move up materially with global growth not picking up,” he added.