The Economic Times of India has an anonymously sourced story outlining the state of the Indian art market:

“One seems to be sensing some stirrings where buying interest, albeit in a very limited way, is coming into a few galleries. Prices of artworks, especially paintings, in some cases, have dropped by around 40-50%. Auction prices have already gone to these levels. But, somehow, galleries had failed to reduce prices to that extent, perhaps because their acquisition prices were higher. Besides, most artists have a tendency not to reduce their prices,” an art specialist and collector told ET. [ . . . ]

According to him, art lovers are on the lookout for their favourite works at bargain levels because prices have become attractive. In fact, this is how the art market was established in India. At the outset, even the masters were available for only a few thousand. They were bought because of their affordability. “Art did not enjoy an investment value in those days. But, those who made acquisitions then, minted gold when the market was established much later,” the collector-specialist said.

“Today’s art market situation is somewhat similar only at a higher level. It appears that today’s buyers may reap a like windfall when the overall financial markets and, in turn, the art market recover. Therefore, one can’t overemphasise the benefits of reducing art prices to fuel a decent revival,” he summed up.

If you’re running an Indian Art Fund that’s both good and bad news. Good news if you’re buying and believe the market will revive. Bad news if your fund is reaching maturity. Here’s Mydigitalfc.com on the subject:

The countdown for redemption of India’s largest art fund, Osian`s Art Fund (OAF), in August has begun, and investors have their fingers crossed as to what is in store for them. Their anxiety stems from the erosion in valuations and the slump in sale of Indian art. Another Delhi-based art fund, Crayon Capital, will mature in November. A third, Yatra Art Fund floated two funds, maturing in September 2010 and September 2011. A fourth, Religare Art Initiative, floated by Religare Enterprises in January last year, will mature in 2011. [ . . .]

As of January this year, OAF had invested in a number of artists. Its website claimed that investments had been made in the works of artists who included V S Gaitonde, M F Husain and Akbar Padamsee. Its other investments as a percentage of the fund included the Progressive Artists Group (20.92 per cent), Focus On Abstraction (17.20 per cent), Calcutta Group and Painters (16.74 per cent), Figurative Focus (15.22 per cent), Contemporary Art (8.33 per cent), Figurative Focus -Bengal (6.17 per cent), Cholamandal Artists (4.05 per cent), Figurative Focus-Delhi (2.96 per cent), Sculpture (2.78 per cent), National Art Treasures (1.54 per cent) and Baroda School (1.11 per cent).

Of course, the maturity of India’s financial and art markets makes some investors very wary of the art funds:

Art funds are run as private associations of people without many disclosures in the public domain. “In countries like Switzerland, art works are legitimately auctioned, valued and authenticated. But that is not the case in India,” said Value Research CEO Dhirendra Kumar said. “It (running art funds) is an illegal activity. No art fund is registered with Sebi. These funds are scandalous in nature. There are no parameters on which the NAVs in art funds are put out. No independent assessment of the underlying valuation of the assets (art works) held by these funds is done,” Kumar added.

Drop in Prices May Fuel Art Market Revival (Economic Times)

Falling NAVs Take Sheen Off Art Funds (Mydigitalfc.com)