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DAILY CURRENT AFFAIRS, 10 JANUARY 2024

PROJECT TIGER

 

1. Context 

In 1973, Project Tiger introduced India’s tiger reserves, whose status has since rapidly ascended. From an administrative category constituted and administered by the forest bureaucracy, tiger reserves became a statutory category in 2006. Today, they are hailed worldwide as India’s conservation success story, especially in this age of climate change
 
2. About Project Tiger
  • The Government of India launched "Project Tiger" on 1st April 1973 to promote the conservation of the tiger.
  • Project Tiger has been the largest species conservation initiative of its kind in the world.
  • While the field implementation of the project, protection and management in the designated reserves is done by the project States, who also provide the matching grant to recurring items of expenditure, deploy field staff/officers and give their salaries, the Project Tiger Directorate of the Ministry of Environment and Forests was mandated with the task of providing technical guidance and funding support.

3.Origin of Project Tiger

  • In 1972, India implemented the Wildlife (Protection) Act (WLPA), which established 'National Parks' within designated forests, transferring the rights of forest-dwellers to the State government. It also introduced 'Wildlife Sanctuaries' where limited rights could be exercised. The launch of Project Tiger stemmed from these changes.
  • Initially, there were nine tiger reserves spanning 9,115 sq. km in 1973. Presently, there are 54 reserves across 18 States, covering 78,135.956 sq. km. Critical Tiger Habitats (CTH) make up 26% of National Parks and Wildlife Sanctuaries, totaling 42,913.37 sq. km. As of 2022, data from camera-trap methods estimated the tiger population in India to be between 3,167 to 3,925.
  • The creation of CTHs aimed to allocate specific forest areas for tiger-centric initiatives. These areas were accompanied by Buffer Areas, a blend of forest and non-forest land. However, the 'fortress conservation' approach, despite its inclusive agenda for the Buffer Area, led to the displacement of people who had coexisted with tigers for generations

4. What is Critical Wildlife Habitat’ (CWH)?

A 'Critical Wildlife Habitat' (CWH) refers to a specific area within a protected region or sanctuary that is identified and demarcated for the conservation and protection of a particular wildlife species or multiple species.

These areas are recognized for their crucial importance in providing habitats, breeding grounds, or essential resources necessary for the survival and well-being of endangered or vulnerable wildlife populations. CWH designations aim to ensure the preservation of these habitats and their ecological balance by implementing stricter conservation measures and regulations to safeguard the wildlife within those areas

5. Tiger Task Force

  • The implementation of Project Tiger over the years has highlighted the need for a statutory authority with legal backing to ensure tiger conservation.
  • Based on the recommendations of the National Board for Wild Life Chaired by the Hon'ble Prime Minister, a Task Force was set up to look into problems of tiger conservation in the country.
  • The recommendations of the said Task Force, interalia include strengthening Project Tiger by giving it statutory and administrative powers, apart from creating the Wildlife Crime Control Bureau.
  • It has also been recommended that an annual report should be submitted to the Central government for laying in Parliament, so that commitment to Project Tiger is reviewed from time to time, in addition to addressing the concerns of local people. 

Broadly the urgent recommendations of the said Task Force are

  1. Reinvigorating the constitution of governance.
  2. Strengthening efforts towards the protection of tigers, checking to poach, convicting wildlife criminals and breaking the international trade network in wildlife body parts and derivatives.
  3. Expanding the undisturbed areas for tigers by reducing human pressure.
  4.  Repair the relationship with local people who share the tiger's habitat by fielding strategies for coexistence.
  5. Regenerate the forest habitats in the fringes of the tiger's protective enclaves by investing in forest, water and grassland economies of the people.

6. National Tiger Conservation Authority (NTCA)

  • Considering the urgency of the situation, Project Tiger has been converted into a statutory authority (NTCA) by providing enabling provisions in the Wild Life (Protection) Act, 1972 through an amendment, viz. Wild Life (Protection) Amendment Act, 2006.
  • This forms one of the urgent recommendations of the Tiger Task Force appointed by the Prime Minister.
  • The NTCA addresses the ecological as well as administrative concerns for conserving tigers, by providing a statutory basis for the protection of tiger reserves, apart from providing strengthened institutional mechanisms for the protection of ecologically sensitive areas and endangered species.
  • The Authority also ensures enforcing guidelines for tiger conservation and monitoring compliance of the same, apart from the placement of motivated and trained officers having good track records as Field Directors of tiger reserves.
  • It also facilitates capacity building of officers and staff posted in tiger reserves, apart from a time-bound staff development plan.
  • The Wild Life (Protection) Amendment Act, 2006 has come into force with effect from the 4th of September, 2006 and the NTCA has also been constituted on the same date.

For Prelims & Mains

For Prelims: Project Tiger, Tiger Task Force, Wild Life (Protection) Act, 1972,  Wild Life (Protection) Amendment Act, 2006, Global Tiger Summit, National Tiger Conservation Authority,
For Mains:
1. Discuss the Role of the National Tiger Conservation Authority in increasing the tiger population in India. Explain the significance of the Tigers in the Ecosystem. (250 Words)

Previous Year Questions

1. The term ‘M-STRIPES’ is sometimes seen in the news in the context of (UPSC 2017)

(a) Captive breeding of Wild Fauna

(b) Maintenance of Tiger Reserves

(c) Indigenous Satellite Navigation System

(d) Security of National Highways

Answer: (b)

2.  Consider the following statements: (UPSC 2014)

1. Animal Welfare Board of India is established under the Environment (Protection) Act, of 1986.
2. National Tiger Conservation Authority is a statutory body.
3. National Ganga River Basin Authority is chaired by the Prime Minister.

Which of the statements given above is/are correct?

(a) 1 only    (b) 2 and 3 only    (c) 2 only    (d) 1, 2 and 3

Answer: (b)

3. Which one of the following is the well-publicized wildlife campaign in the world launched in 1973? (BPSC 2023) 

1. Sunderbans

2. Project Project

3. Tiger Lion Project

4. More than one of the above

5. None of the above

Answer: 2

Source: Tigernet.nic.in

 

PAIKA REBELLION

 
 
 
1. Context
 
The Centre through a written reply in the Rajya Sabha Thursday said the Paika rebellion cannot be called the first War of Independence. Union Culture Minister G Kishan Reddy stated this in a written reply to a question by BJD MP Prashanta Nanda. Since 2017, Odisha has demanded that the rebellion of Odisha be declared as the first war of Independence. At present, the Indian Mutiny or Sepoy Mutiny of 1857 is called the first war of Independence against British Rule
 
2.What is the Paika Rebellion?
 
  • The Paika Bidroha, occurring about 40 years prior to the initial sepoy mutiny, involved the peasant militias serving the Gajapati rulers of Odisha, providing military assistance to the king.
  • The British presence in Odisha began with the East India Company's removal of Khurda's King, Raja Mukunda Deva, in 1803. In 1804, the king devised a rebellion against the British, engaging the Paikas in the plan. However, the British discovered the scheme and seized his entire territory.
  • With the advent of the new colonial regime and British land revenue systems, the Paikas lost their estates.
  • The British interference in economic and revenue matters led to exploitation and oppression of peasants and farmers, eventually sparking a rebellion. Under Bakshi Jagabandhu Bidyadhar's leadership, a significant number of Paikas mobilized and confronted the British on April 2, 1817.
  • A group of 400 Kandhas crossed into Khurda from Ghumsur, initiating the rebellion. The uprising rapidly spread throughout the state, resulting in multiple clashes between the British and the Paika forces.
  • The revolt included the burning of government buildings in Banapur, the killing of policemen, and the looting of the British treasury. Despite continuing for several months, the rebellion was eventually quelled by the British army. Bidyadhar was imprisoned in 1825 and passed away four years later while still in jail
3. Who Were the Paikas?
 
  • The Paikas were essentially peasant militias or warrior classes in the region of Odisha, India. They held a significant role in the socio-political landscape of Odisha, primarily serving the Gajapati rulers (the local kings of Odisha) in military capacities.
  • The term "Paika" is derived from the Sanskrit word "Pada" which means "foot soldier" or "infantryman." These militias were skilled in combat, and their duties included not only military service but also protection of the land, villages, and administration of local justice.
  • Under the traditional system, the Paikas were obliged to render military service to the Gajapati rulers in return for land grants or other privileges. They were organized into units and were considered crucial for the defense of the region against external threats.
  • During times of war, these Paikas formed the backbone of the Gajapati army, displaying their martial prowess and loyalty to the local rulers. However, with the advent of British colonial rule and the imposition of new administrative structures, the significance and role of the Paikas underwent changes. The British disrupted the traditional systems, leading to the decline of their status and influence.
  • The Paikas' discontent over the loss of their traditional rights and estates due to British policies played a pivotal role in triggering the Paika Rebellion of 1817, where they rose against the British East India Company's authority in a significant anti-colonial uprising
4.Causes of Paika rebellion
 
  • The imposition of British rule disrupted the established socio-political and economic structures in Odisha. The British dismantled traditional governance systems, including the land revenue system, which directly impacted the status and livelihoods of the Paikas and other local communities
  • The British policies led to the confiscation of land and estates that were traditionally held by the Paikas. The loss of their landholdings deprived them of their primary source of income and status, causing significant discontent among the Paika warriors
  • The British administration introduced new revenue systems that often exploited the peasants and farmers, imposing heavy taxes and levies. This economic oppression aggravated the grievances of the Paikas and other local communities, leading to widespread discontent
  • The rebellion was also a response to the growing resentment towards British authority and interference in local governance. The Paikas, along with other discontented groups, sought to resist and challenge the dominance of the British East India Company
  • The leadership of figures like Bakshi Jagabandhu Bidyadhar played a crucial role in mobilizing the Paikas against the British. Bidyadhar rallied the discontented Paikas and other locals to resist the British rule and reclaim their lost rights and autonomy
  • The rebellion also had cultural and regional dimensions. It represented a struggle to preserve the traditional identity and autonomy of the Odia people against external colonial forces
 
5. Significance of the Paika rebellion
 
  • It is regarded as one of the earliest uprisings against British colonial rule in India, predating the more widely known sepoy mutiny by nearly four decades. This rebellion symbolizes resistance to British expansionism and their interference in local governance
  • The rebellion stemmed from socio-economic grievances caused by the British policies, particularly the disruption of the traditional land revenue systems. The loss of estates and economic exploitation of peasants and farmers led to widespread discontent, highlighting the impact of British policies on local livelihoods
  • The Paika Rebellion showcased the power and resilience of indigenous peasant militias like the Paikas who were traditionally engaged in military service for local rulers. It illustrates how these groups mobilized against the colonial forces to protect their interests and resist oppression
  • The rebellion's rapid spread across Odisha demonstrates its widespread support and the resonance of anti-colonial sentiments among various sections of society beyond just the immediate participants
  • The rebellion remains a symbol of Odia pride and resistance against foreign rule. It has been celebrated and remembered through various cultural and historical commemorations, contributing to the preservation of Odisha's heritage and identity
6.What was Odisha’s demand?
 
  • In 2017, the Odisha state cabinet, led by CM Naveen Patnaik, passed a resolution for the first time, urging the central government to officially recognize the Paika Rebellion as India's inaugural war of independence.
  • Patnaik, in a letter to the then Home Minister Rajnath Singh, appealed for the Government of India to consider this request positively. He emphasized the significance of acknowledging these events accurately to comprehend India's struggle for freedom and its historic liberation from foreign rule.
  • The state cabinet's proposal characterized the rebellion as a widespread movement, citing it as the primary fight for freedom against foreign dominion, with active participation from the people of Odisha.
  • Additionally, in 2019, CM Patnaik reiterated this demand during the laying of the foundation stone for the Paika Rebellion memorial at Barunei, a sentiment echoed by President Ram Nath Kovind
7.What has been the Centre’s response?
 

The proposal underwent review by the Central government, which assessed the matter in collaboration with the Indian Council of Historical Research (ICHR), operating under the Ministry of Human Resource Development (now rebranded as the Ministry of Education). Based on ICHR's recommendations, the Union Culture Minister conveyed to the Rajya Sabha that the Paika Rebellion could not be officially termed as the initial War of Independence.

Nevertheless, acknowledging the significance of the rebellion that persisted from 1817 to 1825 as a pivotal moment in the series of uprisings against British rule in India, the minister declared its inclusion in the Class VIII history curriculum of NCERT. This decision aimed to recognize the rebellion's role as one of the early popular movements against British colonialism, despite it not being designated as the first War of Independence

 

 

Previous Year Questions

 

1.The Paika Rebellion was led by: (SSC JE CE 2019)

A.Bakshi Jagabandhu

B.Titu Mir

C.Kanhu

D.Sidhu

Answer (A)

 

Source: Indianexpress

SQUARE KILOMETER ARRAY (SKA)

 
 
1. Context
 

The new year ushered in the news that India had decided to formally join the Square Kilometer Array (SKA) project, an international scientific collaboration working to build the world’s largest radio telescope.

India had already been contributing to the project for the past several years, but the full member status, which offers greater scientific opportunities to use the upcoming facility, requires countries to sign and ratify an international treaty, and also make a financial commitment. India has approved Rs 1,250 crore for the project, which includes its funding contribution for the construction phase

2.Square Kilometer Array (SKA) project

 

  • The Square Kilometer Array (SKA) will not function as a singular large telescope but as an assemblage of numerous dish antennas operating collectively.
  • The term "Square Kilometer Array" was originally coined due to the objective of establishing an effective area of one square kilometre (equivalent to one million square meters) for gathering radio waves.
  • This goal was envisioned by setting up numerous smaller antennas in a specific array configuration, enabling them to function as a unified radio telescope.
  • Presently, it seems that the project, valued at USD 2.4 billion in 2021, will eventually possess a smaller collecting area than initially intended. Nonetheless, the original name, Square Kilometer Array, has been retained.
  • The antennas, totaling approximately 200 in South Africa and over 130,000 in Australia, are being positioned in remote areas with sparse population density.
  • These locations were carefully selected to maximize their distance from human activities, aiming to minimize interference from unwanted terrestrial sources.
  • Construction commenced at both sites in December 2022, and the initial phase of the project is anticipated to conclude by the following year. Once operational, SKA is predicted to be between 5 to 60 times more potent than the most advanced existing radio telescopes operating within similar frequency ranges
3. Significance of SKA for India
 
  • Even though India won't host any of the SKA facilities, the country stands to gain significantly in science and technology by being a full member of the project. Similar to instances like the LHC or ITER, both situated abroad, where India's participation reaped substantial benefits for the scientific community, the SKA presents a comparable opportunity.
  • India already boasts advanced capabilities in radio astronomy, exemplified by facilities like the Giant Meterwave Radio Telescope (GMRT) near Pune, known globally for its exceptional scientific output.
  • Additionally, similar facilities exist in Ooty, Nainital, and Bengaluru. For Indian scientists engaged in this field, the SKA represents the next logical progression, promising extensive research opportunities in astronomy's pressing scientific inquiries.
  • Attaining full member status offers India privileged access to SKA facilities. While most telescopes operate under an open-use policy, granting research opportunities to groups worldwide through competitive selection based on scientific merit (as seen in GMRT's functioning), the SKA is likely to prioritize member countries that contribute to its construction.
  • Member nations would receive preferential time allocations on the radio telescope, roughly corresponding to their project contributions, with limited slots available through competitive bidding.
  • The project also promises technological advantages, delving into cutting-edge electronics, software, materials science, and computing.
  • Though the SKA Observatory owns the resulting intellectual properties, they will be accessible to all member countries, presenting significant learning prospects for scientists, academics, and even private industries.
  • Participation in the project is anticipated to expand India's science and technology landscape, fostering capacity building, training opportunities, and the broadening of expertise in this domain.
  • The National Centre for Radio Astrophysics (NCRA) in Pune spearheads India's involvement, collaborating with 22 institutions across the country, encompassing leading research centers, select IITs and IISERs, a few universities, colleges, and even a couple of private companies
4. Way forward
 
India has been involved in the SKA project right from its inception in the 1990s, and contributed to the design and development of the telescope as well as in negotiating the SKA Observatory Convention, the international treaty that established the facility as an intergovernmental organisation. The main contribution has come in the development, and operation, of the Telescope Manager, the ‘neural network’ or the software that will run the entire facility.
 
Source: Indianexpress

BILKIS BANO

 
 
 
1. Context 
 
 
Recently, The Supreme Court struck down the relief granted by the Gujarat government in August 2022 to 11 men who were sentenced to life for the gangrape of Bilkis Bano and the murder of her family members during the 2002 riots and ordered them to surrender to jail authorities within two weeks. 
 
 
 
2. Who is Bilkis Bano?
 
Bilkis Bano is a survivor of the 2002 Gujarat riots in India. She gained prominence as a symbol of resilience and courage in the face of communal violence. In 2002, during the riots, Bilkis Bano's family was attacked, and she was brutally gang-raped. Several members of her family were also killed.
 
Supreme Court verdict in Bilkis Bano case

The Supreme Court of India's verdict in the Bilkis Bano case on January 8th, 2024, was multifaceted and addressed several key aspects

  • The Court quashed the remission of sentences granted by the Gujarat government to the 11 convicts in August 2022. This means the convicts will have to continue serving their life sentences in prison.
  • The Court strongly condemned the Gujarat government's decision to grant remission, calling it "an instance of usurpation of jurisdiction" and "an abuse of discretion." They also criticized the government for not consulting the victim, Bilkis Bano, before making this decision.
  • As the convicts were originally convicted in Maharashtra, the Court directed the Maharashtra government to take appropriate action to ensure the convicts returned to prison within two weeks.
  • The Court found that the convicts obtained the remission order from the Gujarat government through fraud and misrepresentation. They concealed material facts, such as the nature of the crime and the victim's opposition to the release.
  • The Court's decision sets a precedent for future cases involving remission of sentences, especially in cases of heinous crimes. It emphasizes the importance of victim participation, due process, and transparency in such decisions.
  • While the Court's verdict upheld Bilkis Bano's right to justice and ensured the convicts remained in prison, it also highlighted the flaws in the remission process and raised questions about the Gujarat government's actions.
 
 

3.  About Gujarat's Remission Policy

 

Gujarat's remission policy, like those of other Indian states, outlines the process and criteria for granting early release to prisoners serving life sentences. 

Types of Remission

  • Premature Release: Early release based on good conduct, completing a specific portion of the sentence, or reaching an advanced age.
  • Commutation: Reduction in sentence length, usually in extraordinary circumstances like terminal illness or exceptional contributions to society.

Key Points of the Policy

  • Minimum Sentence: 14 years of imprisonment before becoming eligible for remission.
  • Eligibility Criteria: Good conduct, participation in prison programs, age, and medical conditions.
  • Decision-making: The Governor, in consultation with the Home Secretary and a Remission Committee, has the final say.
  • Review Process: Remission decisions can be reviewed if new information or concerns arise.

Recent Controversies

  • The early release of 11 convicts in the 2002 Bilkis Bano gang rape and murder case sparked outrage. The Supreme Court quashed the release, citing procedural flaws and lack of consultation with the victim.
  • Critics argue the policy lacks transparency, with the decision-making process and criteria for granting remission shrouded in secrecy.
  • Fears of the policy being misused for political or personal gain, potentially undermining the justice system.

Ongoing Discussions

  • Calls for revising the policy to ensure fairness, transparency, and adherence to legal principles are gaining momentum.
  • Increasing emphasis on including victims' voices and concerns in the remission process.
  • The debate continues how to balance prisoner rehabilitation with ensuring justice for victims and upholding the law's sanctity.

 

4. About  the Rule of law

 

The Rule of Law is a fundamental principle in governance that emphasizes the equality of all individuals before the law and the consistent application of laws without arbitrary or discriminatory actions. It is a concept that embodies several key principles:

  1. The Rule of Law asserts that all individuals and entities are subject to the law, regardless of their status or power. It promotes equal treatment and protection under the law for everyone.
  2. Laws should be clear, accessible, and predictable. Citizens should be able to understand the laws that govern them, and legal outcomes should be reasonably foreseeable.
  3. The Rule of Law rejects arbitrary or unchecked power. It ensures that decisions and actions by government authorities are based on established laws and procedures, preventing arbitrary or capricious actions.
  4. The Rule of Law includes the principle of due process, which guarantees that individuals have the right to a fair and impartial legal process. This involves proper notice, the right to be heard, legal representation, and access to a fair and independent judiciary.
  5.  All individuals, including government officials, are accountable under the law. This principle prevents impunity and ensures that those who violate the law are held responsible for their actions.
  6. The Rule of Law often involves the separation of powers among different branches of government (executive, legislative, and judicial) to prevent concentration of power and abuse.
  7. The Rule of Law promotes access to justice for all, regardless of economic or social status. This includes ensuring that legal remedies are available and affordable.
  8. The Rule of Law is closely linked to the protection and promotion of fundamental human rights. Laws and legal processes should respect and uphold human rights principles.
 

5. What is the right to liberty?

 

 

Articles 72 and 161 of the Indian Constitution deal with the power of pardon granted to the President and the Governor, respectively. Here's a breakdown of each article:

Article 72 - Power of Pardon of President

  • Grants the President the power to pardon, suspend, remit or commute sentences in all cases where the punishment or sentence is by a court-martial, for offences against any law relating to the Union government, and in all cases of death sentences.
  • The President can pardon someone convicted by a military court, pardon someone convicted of a crime against the federal government (e.g., treason), or commute a death sentence to life imprisonment.

Article 161 - Power of Pardon of Governor

  • Grants the Governor the power to pardon, suspend, remit or commute sentences in all cases where the punishment or sentence is for an offence against any law relating to the matters to which the executive power of the State extends.
  • The Governor can pardon someone convicted by a state court for a crime against the state government (e.g., theft), suspend a prison sentence for medical reasons, or reduce a sentence for good conduct.

Key Differences

  • The President has broader power, covering national offences and military courts, while the Governor's power is limited to offences within the state.
  • The President has exclusive power to grant pardons or commute death sentences.

Similarities

  • Both articles grant the power to pardon (completely erase the conviction and sentence), suspend (temporarily stop the execution of the sentence), remit (reduce the sentence length), and commute (substitute a lesser punishment).
  • Both powers are discretionary, meaning the President and Governor are not obligated to grant remission in all cases.
  • Both powers are subject to judicial review, meaning courts can intervene if they find the exercise of the power to be arbitrary or unreasonable.

Controversies

The use of these powers, particularly in high-profile cases, can be controversial. Concerns include:
  1. Lack of transparency in the decision-making process.
  2. Potential for political or personal influence.
  3. Balancing the need for rehabilitation with public safety and victim concerns.

 

9. The Way Forward

 

The Bilkis Bano case highlights the need for transparency, victim participation, and robust legal frameworks in remission processes. Ongoing discussions on reforming remission policies and upholding the rule of law are crucial for ensuring justice and protecting individual rights in India.

 

Preliminary Examination: Current events of national and international importance

Mains Examination: 

• General Studies I: Social empowerment, communalism
• General Studies II: Structure, organization and functioning of the Executive and the JudiciaryMinistries and Departments of the Government; pressure groups and formal/informal associations and their role in the Polity.
• General Studies IV: Public/Civil Service Values and Ethics in Public Administration
 

 Source: The Indian Express

MOMENTUM INVESTING 
 
 
 

1. Context 

 
Traditionally, experts have advised investors to buy assets when they are selling at low prices, such as during times of a financial crisis, as assets could be found selling at prices well below their intrinsic value. Momentum investing is in stark contrast to this traditional logic. 
 
 
2. Momentum Investing 
 
  • Momentum investing is a strategy where investors acquire assets, such as stocks or bonds, that consistently exhibit upward price trends while divesting assets experiencing declining prices.
  • The fundamental premise of momentum investing lies in purchasing assets on the rise with the expectation that their positive momentum will endure.
  • This strategy aims to capitalize on the potential for further price increases, enabling investors to sell these assets at higher values in the future, thereby generating profits.
  • Conversely, assets witnessing a downward trajectory are sold, anticipating that the decline will persist.
  • The underlying philosophy of momentum investing rests on the belief that identifiable trends exist in asset prices and that these trends demonstrate a tendency to persist over time.
  • By recognizing and engaging with these trends early on, investors seek to leverage the continued momentum for substantial gains in their investment portfolios.

3. Momentum Investing vs. Traditional Wisdom

Departure from Tradition

Traditionally, investment experts have advocated for buying assets during market downturns, especially in times of financial crises when fear among investors leads to prices well below intrinsic value. This conventional wisdom suggests that selling these undervalued assets during a bull market can yield substantial profits. In stark contrast, momentum investing follows a "buy high, sell higher" philosophy, with investors often entering positions in assets reaching new all-time highs, even when trading well above intrinsic values. Numerous academic studies indicate that momentum investing can deliver impressive returns, outperforming benchmark indices.

Neglecting Fundamental Analysis

Momentum investors typically eschew in-depth analyses of the fundamental or intrinsic value of their chosen assets. Their decisions hinge solely on identifying and riding strong price trends, whether upward or downward. Critics argue that this lack of attention to actual asset value may contribute to unsustainable price movements, posing risks for investors who may incur heavy losses if they sell late when prices align with intrinsic values.

Combining Forces

Some investors opt for a dual approach, combining value investing focused on assessing intrinsic value with momentum investing. This strategy aims to leverage existing price trends to enhance returns while considering the fundamental worth of assets. Traditional value investors emphasize purchasing undervalued assets and selling them when prices align with intrinsic values, even if this process takes several years. By blending value and momentum strategies, investors aim to identify undervalued assets precisely when their prices begin trending toward intrinsic value, avoiding prolonged investments in stagnant assets and potentially unlocking higher returns.

 

4. Unveiling Momentum in Passive Index Investing

 

Advocacy for Index Funds

Momentum investors contend that passive investing strategies advocating for index funds tied to benchmarks like the Dow Jones and the S&P 500 are inherently grounded in momentum principles. Renowned value investors, including Warren Buffett, recommend retail investors to opt for index funds mirroring these benchmarks, asserting that they comprise high-quality companies demonstrating consistent earnings growth. However, it's essential to note that the construction of these indices relies on market capitalization rather than the actual earnings of companies. For instance, India's Nifty 50 consists of stocks whose prices have consistently risen, propelling them into the top 50 companies by market capitalization.

The Essence of Momentum Investing

Momentum investors employ diverse methods to assess an asset's price momentum. A straightforward approach involves buying assets with the highest percentage gains over the past three to six months while selling those with the most substantial percentage losses. Another metric involves evaluating an asset's price performance relative to benchmark indices. More sophisticated momentum investors delve into the price charts of assets, attempting to gauge the strength of the upward or downward trends.

Dynamics of Price Movements

It's important to acknowledge that the price of an asset doesn't always follow a clear trend; it might move sideways. During such periods, momentum investors may choose to stay on the sidelines, holding cash until more discernible trends emerge. This flexibility is inherent in the momentum approach, allowing investors to adapt their strategies based on the prevailing market conditions.

 

5. The Way Forward

 

Momentum investing offers a distinct approach, challenging traditional wisdom and potentially delivering high returns. However, it's crucial to acknowledge the potential risks and understand the diverse methods used to navigate the ever-changing tides of the market.

 

For Prelims: Momentum Investing

For Mains: 

1. Define momentum investing and its fundamental premise. Explain how momentum investing capitalizes on upward price trends, and what is its strategy regarding assets in decline. (250 Words)

 

Source: The Hindu

 

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