Bollywood is officially in recovery, but unless it applies the brakes, it runs the risk of over-heating again quite soon.

India has recently produced a couple of massive hits – one each from the Bollywood and Tamil film industries – giving the impression that recession is finally over and the good times are here again.

Dabangg, starring Salman Khan, has grossed more than $40m since it opened last month. A throwback to old-style Bollywood, the film has over-the-top dialogue and action, a story of estranged brothers and the full contingent of song-and-dance routines. Khan plays a corrupt but loveable cop who is so buff that in one scene his shirt manages to pop off all by itself.

Just a few weeks later came Robot, a vehicle for Tamil star Rajnikanth, which makes Dabangg look positively under-stated. The film climaxes with the hero replicating himself hundreds of times and fighting off a barrage of cars and helicopters. Although figures weren’t out at the time of writing, it had a huge opening weekend in both its Tamil and Hindi-dubbed versions.

Hits like these set India’s multiplexes and single screens aflame, but they’re also problematic in that they skew the market. They allow people to reinstate previously discarded notions about revenue potential. And they also give the impression that all you need to make money in Bollywood is a big star.

This throws the emphasis back onto star vehicles and drives up prices once again. Khan is reportedly getting $5m plus a share of profits for his next film Bodyguard. There are also rumours about the high prices studios are paying to acquire upcoming star-driven projects. And yet it was only two years ago that the bottom fell out of Bollywood, and everyone was talking about keeping a handle on costs.

Although the industry has matured over the past five years, films are still financed in response to the question “who is the star?” And the problem with that approach is that there are only five or six stars in Bollywood who can guarantee box office – half of which now produce their own films. There’s no shortage of money but it’s all chasing after the handful of marquee names. A few A-list directors may also secure a greenlight, but there’s still too little attention paid to concept, packaging or script.

This leaves filmmakers who are trying to make something different with the feeling that there’s water, water everywhere but not a drop to finance their next project. It’s also why the person having the most success making quality cinema is himself a star. Although they stand on their own merits, it’s unlikely that Taare Zameen Par and Peepli Live would have been so successful at the Indian box office if they hadn’t had Aamir Khan behind them.

Some other companies are diversifying. UTV has successfully made a range of smaller story-driven films, and Fox Star Studios’ low-budget comedy Khichdi The Movie fared decently despite going up against Rajnikanth. But lessons of the past show that funding for smaller films dries up when financiers lose their shirts on too many star vehicles.

It’s unlikely that anything will change in the short-term. The vast majority of the Indian audience want to see their heroes shoot up the baddies in the most outrageous scenario possible. Cardboard cut-outs of Rajnikanth are worshipped in southern India. Nobody goes to see his films because they like the story or the director’s previous work.

But not every film can be a Dabangg or a Robot. Rajnikanth can replicate himself a hundred times but a hundred Robots will result in yet another market meltdown. If Bollywood doesn’t keep diversifying, it will be stuck in an eternal cycle of boom and bust.