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Art market recaptures its pre-recession momentum
Though the looming threat of recession is gradually fading, concerns about the shape of global recovery are not fully erased. Resilient against the prevailing economic uncertainties, the art market is staging a strong comeback. Avid collectors, fund managers, auctioneers and dealers broadly believe that art as an asset class is on the verge on a smart turnaround trajectory. The market after meltdown in the heat of the global financial crisis is witnessing a rapid rebound; bidders are back to salesrooms, prices are moving up and new benchmarks are being set once again.

After enduring a prolonged and painful correction, contemporary art is now gradually advancing. Experts feel that the market is currently under a consolidation phase. What are the significant aspects of the ongoing recovery?

•Seemingly listless at the beginning of the year, the auction scene has gathered momentum. The primary market is comparatively still looking sluggish. Also, there is hardly any visible trickle-down effect to many of the emerging art forms.

•In a quest to target the discerning and choosy buyer, the auction houses are choosing to focus on quality works. Incidentally, most top lots at recent sales are dominated by traditional and modern art.

•The artists with strong international backing and visibility seem to have greater scope and speed of recovery. For example, Bharti Kher and Subodh Gupta have staged a comeback faster, even as many of their counterparts await resurrection.

•Progressive modernists such as FN Souza, VS Gaitonde, Tyeb Mehta, SH Raza and MF Husain are witnessing good demand. (Surprisingly, their works were on offer for a steal, a year ago.)

As the market dynamics suggests, it’s the availability of fresh or rare pieces that stokes bidding and drives up prices. Conversely, when sellers tend to hold back and buyers turn less optimistic, often second-rate and midrange works flood the market, attracting little interest. The result is a sharp drop-off as witnessed in the case of modern & contemporary Indian art. Tracing its peaks and troughs is like experiencing a real roller-coaster ride.

Three or four years ago, mostly NRIs and wealthy HNIs at home were chasing almost any available slice of Indian art that had become a status symbol to be flaunted with pride. Prices fast reached unsustainable levels, as the euphoria reached a new crescendo. The market was probably looking for an excuse to correct, which was found in the sub-prime crisis. The fall acquired dramatic proportions, and it was a near panic situation for over a year. It was around mid-2009 that auctioneers and serious collectors found common ground at what most believed to be ‘the bottom of the market’. They believed that the time was right to start buying again. The market gradually started to stabilize, as sanity prevailed. The mood turned buoyant after India’s general elections that brought political stability. The economic growth picked up, too. All these factors coupled with slashed estimates and suppressed sellers’ expectations (curbed by auctioneers) hastened the art market revival.

Here are some facts and opinions to substantiate the broad belief that the art market is recovering:

•According to ArtTactic, average auction prices and volumes for modern Indian art are now back to the June 2008 peak levels. Emphasizing the recovery, its recent release mentions: “The current year has been very good for the Indian art market. It’s a remarkable recovery after volumes dropped 63% and prices fell 46% between September 2008 and March 09. The Modern market recovery is also rubbing off on the Contemporary Indian art market, which has remained subdued.”

•Anders Peterson, who runs the London based analysis firm, thinks that auctions are now much like a filtered version of the art market reality. Works of high quality, rarity and proven provenance are more likely to sell. And those that do not demonstrate these qualities will continue to fetch lower prices or none at all. According to him, the focus is back on selective established modern artists such as Gaitonde, Husain, Souza and Akbar Padamsee with ‘proven historical value’.

•Art expert John Elliott mentions in an essay: “Christie’s, Sotheby’s and Saffronart sales suggest that the top end of the modern Indian art market is firmly on the rebound after the 2008-09 crash, showing a considerable improvement for India’s leading modern artists.” A report from Art Radar Asia concurs that a significant change from the earlier trends is the consistent sales of established Indian modern artists rather than the contemporary ones. However, the overall push in the market performance has helped contemporaries’ sales as well.

•Castlestone Management specializing in alternative assets foresees a 40 percent increase in art prices over the next couple of years. It correlates the trend to rising equity prices, terming it a key indicator for analyzing the art markets trends.

However, a section of buyers remains wary. In its first quarter report of 2010, the Mei Moses art index of marketable artworks, has registered a decrease of nearly 5 percent. Echoing the cautious sentiment, Sharmistha Ray asks in a recent Economic Times essay whether it’s all happening too soon. A shallow market is much more susceptible to predatory speculation, a lesson we should have learned well by now. If ever we needed the voice of reason, it’s now, the expert observes. Summing up the situation, Kelly Crow of The Wall Street Journal reveals in a news report: “So far this year, the clash in attitudes - one cautious, the other giddy - has created an unpredictable marketplace in which artworks tend to fly or flop without warning!” Of course, collectors now have become wiser. They do their homework and are far more informed to make the correct decisions, fueling a meaningful market revival.