How to invest in art like you do in stocks

Like the stock market, the art market also has various segments. There are the blue chips—works of famous artists that command very high prices but are also relatively more liquid. Then there are the mid-caps, followed by the works of emerging artists that are the equivalent of small-cap and penny stocks.

Your choice should depend on how much money you can invest, your capacity to take risks and the holding period. The art market has declined 50% in the last few years. With another 20% drop predicted in the coming months, it might be a good idea to wait for a few months before you buy.

THE BLUE CHIPS

Works of the well-known artists. These artists are typically in their 50s and older, have already built a name and sold many works.

Investment size: Rs 50 lakh and above.

Holding period: At least 10 years

Downside: Established names mean the premium has got factored into the price. Don't expect big gains

Prominent names: Atul Dodiya, Bharti Kher, T.V. Santhosh, Subodh Gupta, S.H. Raza and Ram Kumar



Bharti Kher
The skin speaks a language not it's own, 2006

Winning bid: $ 1.7 million (Rs 11 crore at current exchange rate)
S.H. Raza

Kundalini, 1996

Winning bid: Rs 1.2 crore

Ram Kumar

Untitled (landscape), 1986

Winning bid: Rs 72 lakh

T. V. Santhosh

A stone's throw away, 2005

Winning bid: Rs 66 lakh
THE MID-CAPS

Works of typically middle-of-career artists who have greater long-term exponential growth potential compared to senior artists.

Investment size: Rs 10-50 lakh approx

Holding period: At least 7-10 years

Downside: List of such works is long. You have to cherry pick. Not much data available in public domain

Prominent names: Jitish Kallat, G.R. Iranna, Arunkumar H.G., Jagannath Panda



G. R. Iranna

Sand castle, 2014

Winning bid: Rs 21.6 lakh

Jagannath Panda

The entry in silence, 2008

Winning bid: Rs 18.76 lakh

Jitish Kallat

Humiliation tax - I, 2004 - 05

Winning bid: Rs 18 lakh

Arunkumar H.G.

Untitled

Winning bid: Rs 18 lakh
THE PENNY STOCKS

The high-risk category. These artists are relatively unknown. Their valuation may soar as they appear in international galleries.

Investment size: Rs 5-10 lakh approx

Holding period: Atleast 5-7 years

Downside: Smaller works offer better liquidity but bigger works may not appreciate

Prominent names: Ved Prakash Gupta, Jyoti Basu, Baiju Parthan, Gigi Scaria, Dhruvi Acharya, A. Balasubramaniam



Baiju Parthan

Archeology-Kerala-1

Winning bid: Rs 9.6 lakh

Dhruvi Acharya

The future is the past is the present, 2001

Winning bid: Rs 5.49 lakh

Gigi Scaria

Untitled, 2013

Winning bid: Rs 5.16 lakh

Mithu Sen

Untitled, 2008

Winning bid: rs 4.8 lakh
TAXATION: If you sell a painting or sculpture after 3 years, you will pay longterm capital gains tax at 20% with indexation benefit.

INSURANCE: A significant recurring cost. These policies cover fine art, antiques and sculptures on an “agreed value” basis.

THE EXIT ROUTE: You should exit if the price of an artist or a particular work trends downward for two valuation cycles—over a 6-year period.