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A perfect time to acquire quality works of art
For the ever alert investors, keen to add art to their asset basket, this seems to be an opportune time. There are now ample opportunities to strike good bargains – both online and offline. The art market is steadily but surely emerging from dark shadows of the global economic slowdown. The real buyers seem to be back, doing what they know best – buying quality works.

Though concerns about the shape of global recovery are not still fully erased, the art market is exhibiting a marked resilience against the prevailing economic uncertainties. It’s staging a strong recovery largely because of avid collectors, fund managers, auctioneers and dealers, who 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. Simultaneously, India’s contemporary art scene is steadily acquiring prominence and recognition internationally. Though Indian art has been in existence for centuries, its impact on the larger international canvas has been rather limited for years. However, things are now fast changing in appreciation and an apt reflection of the country’s myriad art trends, encompassing socio-political, religious and historical developments.

Not so long ago, mostly wealthy HNIs at home and NRIs were keen to grab Indian art, that in a way had turned into a status symbol. This bout of buying took prices to unsustainable levels; the euphoria reached a crescendo, and the market, probably looking for an excuse to correct, found it in the sub-prime crisis. It was around mid-2009 that auctioneers and serious collectors found common ground at what most believed to be ‘the bottom of the market’, when it started to stabilize.

The economic growth picked up again, thus hastening the art market revival. From a broader perspective, Mukti Khaire, a Harvard Business School professor and R. Daniel Wadhwani from the University of the Pacific, looked at the emergence of modern Indian art as a category in a comprehensive research paper. Until the early 1990s, it was largely characterized as ‘decorative’ in international art circles. Since it was identified with that category, its value remained low.

It was after 1995 that Indian art was classified as modernist and therefore ‘fine art’. It was then accepted as having more aesthetic and economic value than ascribed earlier. Several prominent auction houses translated the changing academic discourse into fathomable constructs, enabling a larger group of participants and lay consumers to follow its finer points. As the understanding of modern Indian art spread, its value automatically increased. This resulted in a greater media coverage, which naturally expanded the circle of interested stakeholders.

In a quest to target today’s discerning and choosy buyers, the top auction houses are choosing to focus on quality works. Incidentally, most top lots at recent sales are dominated by traditional and modern art. Value deals, if one can spot them with help of specialists, are available in the range of Rs 2-10 lakh. The market conditions currently provide investors a good scope to acquire some quality works. Incidentally, most top lots at prominent sales were dominated by traditional and modern art. Progressive modernists, such as FN Souza, VS Gaitonde, Tyeb Mehta, Raza and Husain also have witnessed good demand.

Importantly, the Indian art market, still in an early growth phase, offers immense scope for investment! Here are the factors that will support its long-term growth:

• Merrill Lynch and Capgemini’s latest world wealth survey points out that alternative asset have become an integral part of high net worth individuals (HNIs) portfolios, up from six percent to nine percent. Their sustained buying has pushed up the bar and the upward journey of the price graph has just started.

• Art remains a popular investment option for wealthy in the UK during tough economic times marked by a period of low interest rates and economic worries, a recent BBC News study mentions, quoting from the Royal Institution of Chartered Surveyors (Rics) survey. According to its spokesperson, the art & antiques market remains a strong performer for buyers looking to invest in more tangible assets to guard against the uncertain economic picture. The trend of investing in ‘emotional assets’ is getting stronger with investors, having suffered from the global crisis, returning to objects ‘closer to their hearts’, with a decent ROI and liquidity.

• The art market has certainly become more mature and transparent. Not so long ago, buyers and collectors could compare prices only by attending auctions and rummaging through heavy catalogues. The scenario has changed considerably. The process of acquiring art has become more ‘democratic’, so to say. Also, the base of buyers and sellers is fast expanding! The growth of services and expertise backed by market infrastructure and mechanism within the art world is now more pronounced.

• Collectors are fervently participating in a series of Indian art auctions, making them hugely successful, to establish its global potential. They are treating the sales as an opportunity to acquire some of the very best contemporary and classic works on offer, set to appreciate in the future. The leading market players are focusing on quality works in order to target the discerning buyers’ category.

• Good results from recent auctions of contemporary Indian art including those conducted by Saffronart, AstaGuru, Christie's and Sotheby's suggest that the art market continues to be healthy. Factual evidence gathered on basis of market research and analysis suggests that investing in art can yield good returns.

The market is now largely driven by collectors focused on specific artists and works in spite the looming slowdown threat. According to a news report, modern masters like Husain, Souza and Raza notched sales worth $45 million last year (‘Art as alternative investment’ by Abhay Rao; The Business Standard). The demand for the latter remained considerably strong, at average prices in the region of $115,000, whereas Husain and Raza fetched average price levels twice as high as those in 2005.

Even as the focus remains on the top three modernists, there are several other modern artists doing well apart from an array of talented contemporary artists, experimenting with forms, themes and mediums, to build an identity of their own. Importantly, most Indian artists enjoy a high resale value, constantly surpassing expectations over the past five years.

It is advisable to have a portfolio with both modern and contemporary works as each constituent has a marked potential. You may invest part of your folio in the young and upcoming contemporaries. Who are they? We shall consider a few worthy names in the next part.