Young Indians Buy Old Coins as Investment

[Coinsforever]

Young Indians Buy Old Coins as Investment


Published: Monday, 31 Oct 2011 | 8:14 PM ET Text Size By: Aarti Betigeri
Special to CNBC.com

At a time when investors are shying away from the highly volatile stock market, an unusual asset class is gaining traction among young investors in India. Old coins and bank notes some dating back to the early 1900s are commanding a premium among Indians looking for returns and memorabilia.



As trade is limited to small dealers and collectors, there is no organized data available on the size and value of the Indian market for old coins and evidence of growth is mostly anecdotal. But market watchers say the number of participants in coin auctions has doubled over the past five years.

For example, on eBay [EBAY  31.83    -1.42  (-4.27%)   ], Indian numismatics accounted for about 11 percent of all 2010 transactions, with a coin or note bought every four minutes, according to the website's 2011 census.

There are also several coin shows held across the country every year. According to industry sources there are currently an estimated 10,000 coin collectors across India and they are on the rise.

"A few years ago coin collecting was just a hobby, but now it has become an investment. I have been dealing in coins since 1980 and things have been very good in recent years, and will be even better in years to come," says Rajneesh Jain, a Delhi-based dealer of coins and stamps, and the founding member of the Delhi Coin Society.

He adds that young collectors in the age group of 25-35 are driving growth. Anurag Varshney, 38, a software engineer has been collecting coins seriously for the past 10  years. "I started by picking up anything and everything, but now I focus on coins from one period. I'm trying to collect the whole set," says Varshney.

Coin dealers who spoke to CNBC say that new collectors keep entering the market pushing prices up. "Every time a new coin collector enters the market, prices immediately go up five to 10 percent, and then gradually even more, because of limited availability of the items they want," says Jain.

On average, he says, coin collectors can expect a ten fold return over three years, although in some rare cases, it can be far higher.

One of the most popular coins on the market today, says Jain, is a silver one-rupee coin from 1939, bearing the profile of King George VI. When Jain entered the business in 1980 the coin sold for just 750 rupees, now it can fetch 175,000 rupees ($3,500), if one comes up for sale as it is quite rare. "It's a supply and demand thing," says Jain. According to him the silver coin issued in 1939 is rare to find today as most of the coins from that time were either melted, or withheld by the government.

There are other examples, says Jain, such as the 2001 limited edition commemorative 100 rupee coin that sold for 1,400 rupees at the time, and is now worth 20,000 rupees. Or the 1985 coin, also for 100 rupees,  that is now worth 100,000 rupees. Or the coin collection  consisting of 55 pieces dating from 1969 to 2005, that is now worth 500,000 rupees - five times the price at which it was last sold at an auction five years ago.

But before you start investing in coins, experts advise you do your homework. And the best place to start is the Internet. Learn how to recognize a counterfeit, investigate what 'antique' means, which can be difficult as there are no set regulations and interpretations differ. Also learn how coins are valued based on factors such as quality, age and demand. And importantly, know your market. In India, the demand is primarily for Indian coins, so experts advise against buying foreign coins.

While coin collecting can be a lucrative business, financial experts point out that it is an industry that is unregulated,  lacks transparency and has poor liquidity. "I wouldn't recommend an investor allocate more than 5 percent of their portfolio to old coins, it's just too risky," says Rohit Bhuta, Chief Executive Officer of Religare Macquarie Private Wealth. "The relative lack of transparency makes it hard to establish what and how much is out there. So I advise clients to treat them as a collector's item they get joy from, with the potential of a handsome return down the track."

Source :cnbc

[Figleaf]

The usual shallow blabla, but something is definitely going on. Don't trust anyone referring to a service sector as an "industry". They are either a manager (or an imitation manager) nitwit trying to hide in contentless technobabble or on the verge of creating "collectibles" they will call "products" of the industry, which is even worse.

Only one source for the claim that the demand is driven by the young. Mmm. There goes the fluffy headline. Lots of references to unnamed sources that must lend credence to there being 10 000 coin collectors in India (an un-bechmarked number, therefore useless) and an expected return of 1000% over 3 years (if you believe that, my Ponzi scheme does even better). A price comparison over more than 30 years that does not even take inflation into account and says nothing on the risk (fakes abound, dies are probably still available.) Mindless extrapolation from outliers to trend. I guess almost no one was interested in thinking about the subject.

Only Rohit Bhuta gets it right, but he is quoted as a counterpoint to the hypers only. If you want to invest in coins, be prepared for or a high-volatility investment with a very uncertain return or a lifelong study. If you value those hours of study as cost, the return on coins is haphazard at best, negative at worst. The real investment is the study and the real return is in the development of yourself.



Nevertheless, from what I hear from the Indian community on this site, there is a marked increase in demand for Indian coins. That's all the more interesting because it seems to go against what collectors in North America and Europe are saying. Since the gold price goes the same way in all markets, it cannot explain what is happening. The article blames "the highly volatile stock market". If so, that would mean that volatility of stocks is going up in emerging markets, down in the US and Europe. That is not the case either.

My pet theory is that there is a long-term factor and a short-term factor at work.

The short-term factor is the shrieking, lolling US extreme right, getting into gold coins as protection against a USD implosion and against "gold confiscation". They attract the usual fly-by-night operators offering shady deals and buy common stuff they will have to sell at a loss, which is their Darwinian just reward. Meanwhile, they are driving up the price of common gold coins, which leads some retail investors (also in India) into the same stuff. Well, retail investors are the natural counterparties of pro investors and the source of a good share of the pro's profits.

The long-term factor is that India is doing well. Its poverty problem is far from solved, but its middle class is thriving and it boasts world class enterprises that can compete on their own (I live one hour driving from a huge steel complex, now owned by Tata.) Indians haven't had it so good for at least two centuries. People who earn more money and have what it takes in earthly goods value their free time more highly. In such a trend, it would be normal to see increased interest in hobbies. Numismatics is a rewarding hobby for the educated, especially in India, since Indian history is so rich and its numismatic history so complicated and far from well understood. This is all speculation only, but unless we see some serious research, it's the best I can do.

Peter

[Md. Shariful Islam]

I don't think that the article got the right perception about the collectors. We collect because we all are 'Paisepagal' probably. We collect because we want to prove that we are different. Yes the madness is such that we pay INR 250000 for a one tola silver rupee. Investment? No way. I would better invest in silver rods. Why should I pay 250000 for one tola silver? I would buy land or stocks in crashed stock market. That will give me consistent dividend and if market recovers, then huge capital gain.

Islam

[Ansari]

This is the way dealer themselves create havoc and inflate price.

[asm]

.................. Yes the madness is such that we pay INR 250000 for a one tola silver rupee. Investment? No way. I would better invest in silver rods. Why should I pay 250000 for one tola silver? I would buy land or stocks in crashed stock market. That will give me consistent dividend and if market recovers, then huge capital gain.

Islam, in the Indian context, just visualize the following scenario. A guy who has a lot of unofficial income (amount on which he pays no taxes and which is not recorded as an income) has only 2 avenues left (after the Americans closed the third avenue - the Swiss Bank accounts) to invest. One is Land (where invoicing is @ average 20% to 40% value and Bullion. If there is an Income tax raid (scrutiny), he may get away with the Land deal but not the Bullion. But if he has a silver one tola coin which he bought @Rs. 250,000, he can still claim it as an ancestral handout valued Rs. 600. So if the Tax department totals the assets, he will have far less to worry........... specially the government servants who have in the recent past been caught in the 'assets being disproportionate to income' cases.

Amit

[Coinsforever]

I would say such articles are published  influenced by capitalized group rather than collectors community.

Cheers

[Harry]

I enjoyed this article, I especially like the fact that it says: "But before you start investing in coins, experts advise you do your homework."

I do agree with Peter's long term view:

The long-term factor is that India is doing well. Its poverty problem is far from solved, but its middle class is thriving and it boasts world class enterprises that can compete on their own (I live one hour driving from a huge steel complex, now owned by Tata.) Indians haven't had it so good for at least two centuries. People who earn more money and have what it takes in earthly goods value their free time more highly. In such a trend, it would be normal to see increased interest in hobbies. Numismatics is a rewarding hobby for the educated, especially in India, since Indian history is so rich and its numismatic history so complicated and far from well understood. This is all speculation only, but unless we see some serious research, it's the best I can d

In some sense it is refreshing to see that Indian coins around the world are slowly returning home to collectors in India. Just like the Chinese coins are now being purchased aggressively but Chinese in China.


However, prices for Indian coins have sky rocketed in the past few months, which indicates to me that a lot of investors are buying coins as an alternate asset class to own - equities, FDs, land and now coins and papermoney. If you think Indian coin prices have shot up you should look at what has happened to Indian papermoney in the past 5 yrs! Speculators can drive up the market and can and will bring it crashing down. Good for the collector in the long run but many of collectors who bought when prices are high could get burnt.


Like it or not the economies or the world are much more tightly linked than before. So what happens is Europe matters for the Indian economy. If there is a slowdown in the world economy and given high inflation in India, the Indian economy could stall – when that happens investors and speculators could pull out of the coin market and prices could come crashing down. 


Is there a lot of speculative buying going on? Will prices crash? I really don't know. All I know is that I am now being very cautious and when buying. It could be that I will look back and say "Oh, I wish I had bought more back in early 2012" but that's a risk I'm willing to take.  At the end of the day, I'm a collector and I'll collect regardless of what the investment community thinks – I'm hooked on collecting for life!

[Md. Shariful Islam]

I enjoyed this article, I especially like the fact that it says: "But before you start investing in coins, experts advise you do your homework."

I do agree with Peter's long term view:

In some sense it is refreshing to see that Indian coins around the world are slowly returning home to collectors in India. Just like the Chinese coins are now being purchased aggressively but Chinese in China.


However, prices for Indian coins have sky rocketed in the past few months, which indicates to me that a lot of investors are buying coins as an alternate asset class to own - equities, FDs, land and now coins and papermoney. If you think Indian coin prices have shot up you should look at what has happened to Indian papermoney in the past 5 yrs! Speculators can drive up the market and can and will bring it crashing down. Good for the collector in the long run but many of collectors who bought when prices are high could get burnt.


Like it or not the economies or the world are much more tightly linked than before. So what happens is Europe matters for the Indian economy. If there is a slowdown in the world economy and given high inflation in India, the Indian economy could stall – when that happens investors and speculators could pull out of the coin market and prices could come crashing down. 


Is there a lot of speculative buying going on? Will prices crash? I really don't know. All I know is that I am now being very cautious and when buying. It could be that I will look back and say "Oh, I wish I had bought more back in early 2012" but that's a risk I'm willing to take.  At the end of the day, I'm a collector and I'll collect regardless of what the investment community thinks – I'm hooked on collecting for life!

And I have changed my hobby from collecting coins to reading about coins. Thanks to Art, Amit and one of my colleagues and last but not the least the 'Internet'.

Islam

[$$]

Are you given up collecting coins.

Samir

And I have changed my hobby from collecting coins to reading about coins. Thanks to Art, Amit and one of my colleagues and last but not the least the 'Internet'.

Islam

[Md. Shariful Islam]

Are you given up collecting coins.

Samir

Should I and is that possible? But I have added a braking system . I have slowed down.

Islam

[Figleaf]

Speculators can drive up the market and can and will bring it crashing down. Good for the collector in the long run but many of collectors who bought when prices are high could get burnt.

If it's any comfort, collectors can't get burnt on price, because they are not buying to sell. They get burnt on fakes, fantasies, fraud and misrepresentations.

Like it or not the economies or the world are much more tightly linked than before. So what happens is Europe matters for the Indian economy. If there is a slowdown in the world economy and given high inflation in India, the Indian economy could stall – when that happens investors and speculators could pull out of the coin market and prices could come crashing down.

Good point. You will find a strong correlation between the Indian and US economy and the Indian and Japanese economy. Less so with the EU economy. The correlation is of course caused by international trade: if the US economy is going down, people buy less t-shirts, cars etc., so there's a decline in demand for anything from steel to cotton to textile making machines and there's less information to be entered through Indian data centers. There was speculation about "de-coupling" in 2008, as emerging markets were holding out longer, but in the end, the correlation was restored. I don't see a currency or political crisis in India that would send hot money away from the country, though. At worst a dip caused by exports, but there should be a speedy recovery by the third quarter of 2012, when the consensus says the worst will be over - if currency markets calm down it may even be sooner. That would leave the retail investors with the wrong portfolio. Second rate equity would do best, short term bonds worst. Commercial metals (especially iron, steel, copper and aluminium), oil and freight would do nicely. None of the above is investment advice. Make your own investment decisions.

At the end of the day, I'm a collector and I'll collect regardless of what the investment community thinks – I'm hooked on collecting for life!

Yes! That's the perfect bottom line.

Peter

[akona20]

For the average person coins and investment should not really be coupled.

At the high end (ultra high end) the hype and scarcity of some coins makes them an interesting proposition if you have virtually unlimited funds. So for the rest of us it becomes a hobby and hobbies normaly cost money rather than make money.

However we can even the odds up a little in our favour by researching and understanding what our chosen collection habit is. That is of course if there are sufficient and correct records to help us in understanding what we are collecting. Prejudices in favour of certain issues raise prices and prejudices against some issues (or just plain lack of or bad information) reduces prices. Prices will rise in countries where a middle class is expanding because of demand.

So let's be honest here, you don't buy gold or silver coins as a metal investment you buy gold or silver bars.

[Coinsforever]

They get burnt on fakes, fantasies, fraud and misrepresentations.

With due respect I 've different view points .

A collector has to be careful & forsee such risks by doing the homework (with exception during initial stage) .

For  an advance collector I don't anticipate chances to get  ripped off ocassionally due to his awareness & knowledge.

hobbies normaly cost money rather than make money.

Well said , the  pleasure & relaxation that hobby gives during leisure is uncomparable with best level of self satisfaction one can feel.


Cheers

[Bimat]

Another story...

Many sides of the coin

ARVIND JAYARAM

There's a good market for rare coins in India, and for serious collectors, auctions present an opportunity to source items that are not available elsewhere.

Indeed, numismatics is all about coins acquiring a value that is much higher than the monetary value conferred on them by law. And there's an underlying promise of a handsome return on your investment if you buy the right coins and the market is right.

"It's a great investment. We have seen a steady growth over the last 12-14 years. We've been seeing that some coins tend to double every three and a half to four years," says Malcolm Toddywala of Toddywala Auctions, one of the pioneers in the auction market for coins in India.

Collector value

But you can't expect high returns on all coins. Auctioneers say that it is a misconception that all old coins are valuable. Like any other market, value of a collectible item soars if it is in short supply.

Rajender Maru, Director of Marudhar Arts, a Bangalore-based auction house that also sells numismatic items, cites the example of coins issued by Emperor Jehangir in the Mughal period.

"These coins are filled in the classical way; he had a lot of respect for the Hindu religion, so he issued a set of 12 zodiac coins. These silver coins are valued at ₹3-10 lakh. If they are gold, they fetch ₹50 lakh to ₹1.25 crore."

Some of the most valuable Indian coins hail from the Sultanate to British India Empire period. "These coins are very expensive. In our upcoming auction, we are offering 25 coins that are valued at more than ₹5 lakh each."

Rarity apart, the value also depends on the condition of the coin. Maru gives the example of the Scorpio zodiac coins issued by Jehangir.

"If the condition is poor, they are worth ₹1 lakh. But if they are fine, the price is ₹6 lakh, while an extra fine specimen commands ₹8 lakh-plus. If the coins are not in circulation, they can fetch a price of ₹15-20 lakh."

Toddywala cites the William Double Mohur and the Krishna Devaraya Two Pagodas of Lord Balaji (Tirupati), as sought-after coins priced at over ₹10 lakh.

The most valuable Indian coins today, according to Maru, are not in India anymore. One is a four-gram gold coin featuring the images of Rama and Sita issued by Emperor Akbar after he married Jodha, only two of which exist today. "One is held by a collector in New York and another is in a museum in Vienna. When sold, these attracted a price of ₹2 crore," he exclaims. Another was a gift offered by Emperor Jahangir to a Saudi Arabian king. That was sold in 1988 in London for a whopping ₹80 crore.

Elaborating on market mechanics, Amit Surana, an avid collector and Partner at Mumbai-based Surana Art, a gallery specialised in numismatic items, says: "It has a very good return, but it is dependant on how well the economy is doing — stock market, bullion, etc. When cash flow is on the higher side, people will invest more, and when it is not there, people don't participate," adds Surana.

Auction advantage

Though coins can be acquired through private deals between collectors, public auctions are emerging as a safe route for collectors. Auction houses charge a hammer commission, service tax and VAT and the transaction is transparent.

What's the advantage of acquiring coins through an auction house instead of at a store? According to Maru, it's the promise that the article you are purchasing is genuine.

With an auctioneer, a collector gets the correct description and accurate images of the item; if the coin is doubtful or fake, it has to be withdrawn.

In this regard, Maru warns that people do get gypped in private deals.

"Suppose I'm offering a coin. You don't know anything about the market. The coin cost is ₹10,000. I make up a nonsense story and sell it for ₹2 lakh. After some time, you find out the real value of the coin. When I come back for resale, I'll say I've not sold it to you."

Auction house licences, in contrast, are not easy to obtain. "I got my licence after 5 years, 11 months and 7 days. There were checks by immigration authorities, the customs department, civil department, the CBI, and the local police station that I've not done any crime, have not defaulted, have no tax dues," says Maru. Auctions also help in price discovery. So how do you ensure that you don't overbid when participating in a coin auction?

The collector Surana says, "The best thing to do is visit all the auctioneers who have expert panels and can give you an opinion on the item. You can also visit an exhibition where many numismatists are participating so that you get the best information related to the items."

How to participate

Visiting a coin auction doesn't cost anything. There are a number of auctions in India and you can register with them, to participate.

"There's no difficulty in participating. You can view an auction without paying or registering, but you need to have a reference to register for participation," says Surana.

You don't even have to go to an auction to submit a bid in the internet age. Toddywala Auctions, for instance, uploads catalogues on to the internet and people can bid online.

The online bids are collated and stopped two hours before the auction. Thereafter, people at the physical venue arrive and place their bids.

The entire process can be viewed real time too. "People can see how the current bid price is moving, similar to e-Bay auctions. The idea is for transparency as to what the current bid amount is," says Toddywala.

(This article was published on January 31, 2015)

Source: The Hindu

[Overlord]

"If the condition is poor, they are worth ₹1 lakh. But if they are fine, the price is ₹6 lakh, while an extra fine specimen commands ₹8 lakh-plus. If the coins are not in circulation, they can fetch a price of ₹15-20 lakh."