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Best month for Europe stocks since 2011; where now?

Major concerns over the falling price of oil and Greek parliamentary elections haven't been enough to rub the shine off European equities, which currently stand at 7-year highs.

At the end of the last trading day in January, the Euro Stoxx 600 benchmark closed up 7.2 percent on the year.

In Germany, the 9.1 percentage gain for the DAX in January easily outpaced the , which has lost around 2.2 percent this month.

Market watchers like Michael Hewson, chief market analyst at brokerage CMC Markets, aren't getting carried away, however. He told CNBC via email that there are concerns in the market about the state of Greece's finances.

"This may cause increasing volatility in the coming weeks, but unless we get another black swan event we could well see further gradual gains in broader European markets in the coming weeks and months," he said. A "black swan event" is a large and unpredictable issue that roils global asset markets.

Despite some major volatility in global markets, the main driver for Europe in January was the launch of an open-ended monthly bond-buying program by the European Central Bank (ECB). The bank plans to purchase 60 billion euro ($70 billion) worth of private and public debt each month until at least September 2016.

This could amount to as much as a trillion euros swishing around the euro zone economy, and means the ECB has joined the U.S. Federal Reserve, Bank of England and Bank of Japan in launching a quantitative easing (QE) scheme.

Kerry Craig and Alex Dryden, two global market strategists at JPMorgan, said there is an expectation that ECB asset purchases will continue to drive European markets higher, and that investors might be better off treating the market with caution.

"While QE provides a much-needed confidence boost in the near term, we would advise against simply applying the U.S. experience to European equity markets," they said in a note on Friday.

"Instead, investors should continue to focus on fundamentals and on the ability of companies to deliver earnings growth in the year ahead."

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In terms of individual stocks, Spanish multinational corporation Abengoa led the rally in January, with a 44 percent rise over the month. Banca Popolare di Milano rose 30.8 percent, Peugeot clocked up a gain of 25.5 percent, and lighting manufacturer Osram Licht and Italian industrial group Finmeccanica both climbed around 25 percent.

Nobel Prize-winning economist Robert Shiller spoke of the merits of investing in Europe this week, especially in the Russian and Greek markets. He told CNBC Wednesday that his CAPE ratio, which measures average inflation-adjusted earnings for stock indexes over the previous 10 years, was showing that European equities were showing some promise.

He added that U.S. stock valuations were high but that in Europe they were "much, much, lower."

"Some people say that everything is overpriced right now, well there's some truth to that, but there's also still a lot of opportunities," he said.

Gemma Godfrey, head of investment strategy at Brooks Macdonald, agreed that on a valuation basis, European equities had further potential upside. She told CNBC via email that cheaper oil prices and a weaker euro should also provide a fillip and predicted that bank lending would rise after years of deleveraging.

"At the same time, high unemployment, gathering momentum for the anti-austerity movement and still-subdued growth mean European equities will have a bumpy ride," she said.