Speculators may be poised for return to art market

Speculators may be poised for return to art market

New Delhi: A rebound in valuations in the modern Indian art market appears to have brought speculators back into the fray.

According to the latest report by London-based art market research firm ArtTactic Ltd, which surveys 96 key players in the Indian art market every six months, the perception of speculation is on the rise after a significant drop in May 2009, when the Indian art market was at an all-time low.

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The ArtTactic Speculation Barometer for Modern Indian Art shows a 28% increase since October 2009, and is now at 6.3, up from 4.9. This is the highest reading since ArtTactic started its survey in May 2007.

The speculation barometer is measured on a scale of 1 to 10, where 1 represents a very low level of speculation and 10 very high. The barometer indicates how respondents view the level of speculation in the art market. The report mentions that respondents are concerned that if the market rebounds too quickly, fuelled by speculative buying, it risks entering another bubble.

Arvind Vijaymohan, who heads Indian arts advisory Japa Arts Pvt. Ltd, says it would be fair to assume that in a young market such as India, where appreciation for art is not engrained at a formative level, speculation is bound to be a key driver. “In my reading of the Indian context, most collectors who entered the market over the last five-seven years were keen speculators."

Commenting on the ArtTactic report, Vijaymohan says that in the current situation, there exists a section of speculators who consider this the perfect time to enter the market, and acquire works of modern Indian art at low values. “Some prominent players are on standby to acquire."

Liquidity surge

Liquidity in the Indian art auction market has increased since it hit bottom in March 2009. The combined auction sales for Indian art in March 2010 raised a total of $15.2 million (Rs69.3 crore). Leading auction house Sotheby’s sales illustrate this: Its March 2010 auction of Indian and Southeast Asian art in New York fetched $8.2 million. Its March and September 2009 auctions realized $3.32 million and $3.75 million, respectively.

The overall Indian Art Market Confidence Indicator (including both modern and contemporary art) has risen 26% from 49 in October 2009 to 62 now, implying that for the first time since October 2008, there is more positive than negative sentiment in the market for Indian art. The 50 mark indicates that there are an equal number of positive and negative responses on the outlook for the art market in the short term.

An interesting highlight of the report is that the gap in confidence between the modern and contemporary Indian art market is widening. The Modern Indian Confidence Indicator is 51% higher than the equivalent confidence indicator for contemporary art. The report reasons that the established nature of the modern Indian market has created a sense of “safe haven" for many art buyers, a fact that is leading to its expansion.

At the outbreak of the global art market downturn in late 2008, the modern Indian art market saw a significant drop in confidence. However, compared with many of the other emerging markets, the decline was relatively modest.

This survey shows that 72% of the respondents believe that prices have now stopped falling in the modern Indian art market. This is a positive turn in sentiment from the last reading in October 2009, when 61% of respondents believed the modern Indian art market would face further downward pressure on prices.

In October, 68% of respondents had estimated a rebound in the Indian modern art market in one-two years. The recent reading indicates that 51% of respondents feel the market has already recovered, and 37% say the market will bounce back within a year.

For Anders Petterson, managing director of ArtTactic, the most revealing aspect of the report is the speed of the recovery in the modern art market even though it raises the threat of speculative buying.

According to Petterson, ArtTactic has seen a significant pick-up in subscribers during the last 12 months. “The downturn and the uncertainty around valuations has increased the demand and interest in independent research."

Graphic by Yogesh Kumar/Mint