The bull finds a fresh pasture in the art-mart
ET Art index posted a return of close to 100% annually in the past three years.
By Muthukumar K & Preeti R Iyer, TNN |
Hammer strikes and the painting ‘Man with Monstrance’ by F N Souza goes for $ 1.36 million at Sotheby’s this week gone by. It reaches the top ten charts the Bob Dylanesque way. The late Mr Souza couldn’t enjoy the moment . Almost in juxtaposition, Tyeb Mehta’s two untitled works fetch a million dollar plus each. Mr Mehta isn’t necessarily happy. In this week Sotheby’s and Christie’s auctions, five works of Indian artists have made it to the million dollar mark. Only 13 such high-value Indian art works have been registered so far. And it has been the investors – not the artists - who raked in the moolah.
| Every Rs 100 invested in Jan ’01 fetched Rs 1,092 in the case of art at current prices, while equities fetched Rs 444, gold Rs 212, and debt Rs 155. Since ’01, the ET Art index has given 2.5 times the returns of equities. |
Indian art market is booming and astute investors with eye for aesthetics are making more money than the artists themselves. Private collectors from Japan and Singapore are outbidding others to possess Indian art. The fact that the artists themselves sold their works at fraction of their current market value proves the point that having artistic bent of mind isn’t the only requirement to make money in art. Remember the late Amrita Sher-Gil’s ‘Village’ that made headlines selling at Rs 6.9 crore not so long ago. It fetched a meagre Rs 11 lakh in October 1992.
Her other work ‘The Red Hut’ along with recent sale of ‘Man with Monstrance’ figure among the top three works in terms price paid per square inch. Surely , art is not for everybody. Right of admission reserved, just as with the SundayET edition.
So now, the big question: Can we begin to look at art as an asset class just as we do with equities, gold, debt or real estate? We have analysed the performances of art prices and their trends for various Indian artists to answer your question.
A little number crunching reveals that Indian art, as measured by ET Art index (comprising top 51 contemporary Indian artists), have beaten returns posted by equities, gold or debt. Every Rs 100 invested in Jan ’01 fetched Rs 1,092 in the case of art at current prices, while equities fetched Rs 444, gold Rs 212, and debt Rs 155. Since ’01, the ET Art index has given 2.5 times the returns of equities.
But then, returns from art have also been less predictable. For the period ’00 and ’03, ET Art index hardly saw an appreciation . But then, began the bull-run in the art market almost in tandem with Indian equities. ET Art index posted a return of close to 100% annually in the past three years.
So, why have art prices appreciated so much in value terms in such a short timespan ? There are two schools of thought. While art connoisseurs justify the current high prices by attributing it to market maturity , cynics look at it as a bubble built on fancy. There is a consensus though that some well known artists over the years have developed their original style and established their body of work gaining historical significance. Its works are now getting recognised in terms of higher prices.
The following numbers to some extent justify the argument. Historically speaking , art works of Ram Kumar, Tyeb Mehta, and Jogen Chowdhury gave the best returns to investors and in that order. Since ’98, works of Ram Kumar saw stupendous price growth of 76.4% per annum , while that of Mr Mehta 75.7% per annum and Mr Chowdhury 74.2% per annum. M F Husain’s works gave a return of 39% annually, Sultan J Ali 35% and Raja Ravi Varma 31.8%.
There is a flip side to art investments though. Its market value could depreciate much faster. In calendar ’06, works of Ganesh Pyne (-44 .5%), Prabhakar Barwe (-56 %), Atul Dodiya (-57 .3%), Jamini Roy (-31 .4%) and K H Ara (-31 .4%) saw a huge correction. It needs to be noted though that unlike stocks prices, art prices in the case of individual artists are updated as and when audited trade happens and get reported. Any prolonged non-trading could exhibit performance in extremes over the shorter term. Since works of artists are in different media and dimensions , the square inch rate (SIR) has been taken to measure and compare the values of art fairly. The returns are calculated on the basis of square inch rate of each of the artists.
The top ten works on the basis of SIR value are upwards of Rs 36,000. As per Osian’s data, Amrita Sher-Gil’s ‘The Red Hut’ and ‘Village Scene’ top the SIR charts with SIRs of Rs 89,398 and Rs 74,595, respectively . They are followed by ‘Man with Monstrance’ with SIR of Rs 72,485, ‘Mother & Child’ (Ram Kumar) Rs 64,082 and ‘A Domestic Scenario’ (Jogen Chowdhury) Rs 51,575.
An investing mind could probably easily grasp the basics of art investing. Artists with good brand name and works of historical significance are like large-cap stocks. They are relatively safer to invest, but the returns not as lucrative as midcaps . Akbar Padamsee, M F Husain, Jamini Roy, Tyeb Mehta could be classified as large caps. But then, if you’ve guessed it right, it’s upcoming artists – the future MF Husains or Tyeb Mehtas that yield the best returns, provided you spot the talent much before others.
The downside is that they may not see an appreciation at all, making it a relatively riskier investment. Interestingly, in the art business the dead are respected more. If the works of dead artists are well known, they fetch a higher price per inch of work thanks to limited supply. Again, shrewd investors bet on older artists. Ram Kumar (born in 1924), Tyeb Mehta (born 1925), V S Gaitonde (dead) and F N Souza (dead) feature among the top ten in terms of price appreciation since ’98.
Experts feel it may take a while before art gains full credibility as an asset class. While some art funds have been floated in recent times, there is little track record of performance. While for a layperson, art funds could be the best way out, again initial investment make it an exclusive preserve of the well-heeled . Individual buying and selling, even for connoisseurs, has its own challenges.
First of all, there are issues of fake works. As a thumb rule, therefore, experts suggest checking the provenance documentation, including full title and ownership checks of the artwork .
Secondly, trading in art involves significantly higher costs in the form of commission to be paid to galleries or agents making art trading unremunerative . Commissions (both on buying and selling side) are higher in the range of 10-25 % of the price as the case may be.
Liquidity is another issue, particularly for smaller artists. Around 200 such artists have a secondary market. Insurance and maintenance are other costs.
But then, Indian art has rewarded buy-and-hold investors with eye for aesthetics. The latter, though, aren’t necessarily Indians.
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