KARACHI, June 21: As the stock market crashed by 10 per cent in the week ended on Friday with the KSE-100 index at 63 weeks (440 days) low of 11,655 points, the market has become too dangerous a place for investors with small means.

Since April 18, when the current meltdown began, equities have lost as much as 26 per cent of their value or 4,000 points.

“A small investor who may have committed his savings in the bull market two months ago, would now be poorer by a quarter of his wealth,” says a stock trader. And a small time stock broker, who asked not to be named, swore that he had daily to cuddle and console many a small investor who enter his office weeping like a child.

The market had not witnessed such massive weekly plunge of 1,286 points since May 2005. At the current level, the index stands at about the same level as on April 6, 2007.

So should the small investors avoid the equity market like a plague?

“The reason that the stock market gives fabulously higher returns over other investment avenues in the long term is because it entails higher risk,” says a stockbroker who disagrees with the deserting tactic. He thinks that the factors that basically drive the market are risk and reward; fear and greed. If the small savers have been a casualty of the bloodbath, most major market players believe they are themselves to blame.

“Losses have been caused to investors who overplayed on the basis of borrowed money,” says a participant. “What else is likely to happen if a person with little or no holding power takes stocks valuing three times his purchasing power on leveraged buying,” he asks, adding: “when margin calls are made, such investors are almost always certain to come to grief”.

Shareholders could perhaps draw small comfort from the slight increase in volume to 135 million shares, though that would still be 41 per cent lower than average volume of 227 million shares traded in 2008.

Next is the rollover week for future contracts, which is one of the reasons that the pundits do not predict a change of tide. But the best of stock gurus are unable to pinpoint the reasons for the current stock slide. There are the humdrum reasons: Uncertain politics; fear of enhancement of capital value tax; concerns over the possibility of further hike in discount rates; possibility of margin cuts for OMCs and Refineries and the overall economy.

“Among them all, the last (dismal economic scenario) could be the major factor pulling the market down,” says a stock strategist.

He believes that the stock market, which is regarded as a barometer of the economy has only recently started to function properly at the KSE and the right readings are quite clearly frightening.

Foreign selling during the week stood at $23 million, which could scarcely have caused the heavy downslide. Lack of positive news and scare-mongering and rumour-mongering have been at the heart of investors’ discomfort.

For the small investors the troubling times are a grim reminder of the crisis of March 2005. One such investor grumbled that the only difference was that there were no “lower locks” this time and doors were wide open for the investors to seek an exit. But few investors dared to take a loss.

“The greatest difficulty and the one that distinguishes investor intelligence is to know when to quit in a fiercely bear market,” Warren Buffet, the most successful international investor of the last century and now the richest man in the world, was once quoted to have said.