Indian Investors Taking Advantage of Fine Wine Assets
The year 2012 has seen a huge increase of investors from India stepping into the Bordeaux fine wine market. As one of the world’s fastest growing economies, more and more Indian HNI’s (High Net-Worth Individuals) are turning to luxury French wines as a way to bolster their investment portfolios, and the reasons therefore are hardly surprising.
As a consequence of the financial crisis and widespread market meltdowns, many traditional investments have soured, leaving investors having sustained heavy losses. Therefore, clever investors are now seeking alternative investment vehicles that show an incline for high capital growth, with minimal risk, and Investment Grade fine wine fits the bill.
The emerging economy of India shows unstoppable growth and this is reflected by the immense interest and curiosity from Indian investors in fine wines. What used to be a market for the rich and elite has now been swarmed by savvy investors who are looking to take advantage of the wine boom. The allure of fine wines is no longer reserved for the world’s richest, institutional investors, 5-star hotels, CEO’s and top-tier consumers; as the middle class grows in wealth, so does it’s appetite for the finest wines.
One must take into consideration that the concept of wine investment is relatively new to India and there are few companies offering these kinds of services. Therefore, due to the significant increase of Indian private investors and institutional investors (also known as Bollygarchs), and the rising demand for fine wine in India, Bordeaux Traders has recently opened a new branch in Mumbai, India.
Furthermore, the global economic upheaval has resulted in the Indian Rupee taking a hit in the foreign exchange market. Instead of helplessly watching their currencies fade in value, intelligent investors in India are securing their assets through alternative investment vehicles, such as luxury wines. As these tangible assets can be sold globally, at any time, in any currency, it is a more secure way to prevent the depreciation of one’s assets.
A crucial aspect that may propel the wine market to new heights in India are the trade regulations concerning imported alcohol. Imported wines are subject to a 150pc import tariff in India, with an additional duty of 4pc – prior to subsequent taxes for individual states that range from 30pc to 100pc. The new agreement, currently in negotiation, could see tariffs cut down to 40pc, majorly boosting the demand in India and the appeal of wine as an investment.
Hypothetical comparisons have been made with Hong Kong, where taxes on wine and beer were abolished entirely in 2008, resulting in Hong Kong becoming the world’s premier wine trading hub, due to an explosion in demand. Whether the new trade laws in India, coupled with the rising economy and emergence of wealth will have the same effect, remains to be seen.
Although there is much speculation as to the consequences of India opening up to the wine investment trade, no one can predict exactly how the industry will transform with a flood of shrewd Indian investors. However, one thing is clear; as the Indian economy continues its explosive growth, there is no doubt that India looks set to be a key player in the fine wine market in the near future.
Bordeaux Traders - The Fine Wine Investment Brokerage GmbH
Mooslackengasse 17, 1190 Vienna
Phone: +43 676 490 51 19