KARACHI/LAHORE - The unending political uncertainty has derailed the stock market during the past few months, leading to a massive erosion of 5,969 points of the KSE-100 index. The local stock markets have been under tremendous selling pressure for last four months as the key local and foreign investors have deserted the market in disappointment amid increasing political tension. The KSE-100 index hit the highest benchmark of 15,676 points on April 18, 2008 with a market capitalization of Rs4.79 trillion ($77.25b) when calculated at Rs62 dollar-rupee parity, prevailing at that time. By Thursday the KSE-100 plummeted to 9,707 points, showing a colossal decline of 5,969 points in just three and a half months while the market capitalization also dropped to Rs3.034 trillion ($42.13b) when calculated at the existing dollar-rupee exchange rate of Rs72. Brokers told The Nation that the unending recession at the stock market has not only wiped out nearly Rs2 trillion worth capitalisation of the market, but has also bankrupted thousands of investors, especially the small investors, adding that foreign investors and institutions who acquired stake when the KSE-100 index excelled 15,000 points benchmark, also faced trouble due to massive losses. Equity market experts are of the opinion that stock market is the barometer of economy and economic indicators impact the market directly, however, high stocks do not necessarily signal a good economy for all, yet a bust is bad for almost everyone. If the market drops drastically and stays down, it usually happens because of some fundamental economic crisis. This hurts working people. For instance, they said, the stock market boom was seen in the aftermath of the Feb 18 polls in anticipation of people's hopes for a change. But market, after a record high of 15,600 level, continued to drop because the new regime failed to come up to the expectations of investors. The Karachi Stock Exchange is $37 billion market, which has dropped around 38 per cent since a life high on April 21 and is down by 31 per cent so far this year, making it Asia's third worst performer after Vietnam and China, dealers said. Tariq Khurshid, a stock market expert with a Lahore-based brokerage house, is of the view that market goes up when corporate profits increase. However, he said, the market's swings are directly linked to the ups and downs of production and corporate incomes. Mostly fluctuation reflects the stock market's speculative nature. It is a huge gambling game sometimes driven more by the psychology of the investors than by economic analysis. "Changes in the stock market can have a quick impact on the finances of the investors of the country, particularly of those who invest heavily. Yet for the common man who own no stock, the stock market has no immediate relevance," analysts added. Stocks are shares of ownership in corporations. So the amount that investors are willing to pay for stocks tells us what they think about the well-being of business of the country. If these investors whether they are rich individuals or managers of pension and other investment funds, believe profits will be growing strongly in the coming period, they will be willing to pay more for their shares of owner ship. Hence the market will rise. Aqeel Karim Dhedi, Chairman of AKD Securities, the uncrowned king of the stock market on whose fingers dance the index of market said that current turmoil in the stock market had certainly affected all financial sectors of the country. Stock market, AKD said, was considered the barometer on the basis of which the economic health of the country was assessed. When the stock market flourished the economy also boomed and when the market was bearish the economy suffered a blow, especially in the shape of losses to investors and decline in the foreign investment, he added. However, it is historical fact Pakistani stock markets performed well when the economy of the country was not good .The markets remained bullish even under the worst law and order situation coupled with wave of downturn seen at the global markets, he said in support of his argument. The core reasons behind the massive plunge in the stock market were prolonged political uncertainty and slump in global markets, he said and added that Pakistani stock market was resilient and have ability to promptly absorb any negative incident. But if the political uncertainty lingered on for a long time the market reacts negatively. AKD said that government institutions have also been disturbed by the recent crash in the stock markets, which prompted decline in their holdings. Aqeel pointed out that government could not achieve the values set for the privatisation of its companies it was expecting before the current downturn in the stock market. Dhedi said that recent increase of 100bps in discount rate has negatively affected the equity markets and industrial sector as well. However, its impact will not be negative in short run while in medium and long terms it will be a disaster for the industrial and other cash rich companies of the country. Commenting on the huge foreign investment outflow, Dhedi said it was not abnormal because the global markets have had also gone through huge sale off wave for last few months, as a result of which outflow of foreign investment was also witnessed in Pakistani markets. Renowned economist Dr Shahid Hassan said that stock market was not the barometer of the economy rather Pakistani stock market was considered as a casino, where some big brokers keep fleecing small investors, including pensioners, people belong to middle class and others. Hassan maintained that the data of State Bank of Pakistan showed that up and downturn in the stock market had made no impact on the country's economy.