"Crazy," muttered one man, amid a swirl of excited chatter and scattered applause. He—and many among the largely Indian crowd—realized that only a decade ago, similarly substantive work by Gaitonde and other leading Indian modern artists could be had for just a few thousand dollars.

VASUDEO GAITONDE'S untitled 1975 painting sold for $1.47 million at a Christie’s auction in March. It was the second modern Indian painting to sell for more than $1 million that week. (Photograph courtesy Christie's.)

The first Gaitonde to crack $1 million, this untitled work painted in 1975 is one of only half a dozen modern Indian paintings ever to fetch seven figures—all of them sold since last September. The incredulous crowd at Christie’s was also well aware that the Gaitonde was the third $1 million-plus modern Indian painting sold that week. At Sotheby’s the previous day, an abstract painting by Syed Haider Raza from 1972 brought $1.47 million, while Tyeb Mehta’s Falling Figure with Bird fetched $1.25 million.

Top paintings by the most-established Indian artists are drawing the greatest attention, but the boom is rippling across the entire market. Many lots at Christie’s and Sotheby’s fetched more than double their low estimates, despite the fact that two significant sales were held earlier that same month—one in New Delhi at Osian’s auction house and one by online house Saffronart, which has offices in Mumbai and New York.

"The market is broadening and deepening," says New York-based Indian hedge fund manager Rajiv Chaudhri. A native of New Delhi who moved to the United States in 1981, Chaudhri began building a collection a dozen years ago. Chaudhri and his wife, Payal, now own dozens of works by important artists, including Raza and Maqbool Fida Husain. "A tremendous amount of art came into the market and was absorbed, with a substantial appreciation in price," he says.

Modern art first flowered on the eve of India’s independence in 1947. Today’s spectacular rise parallels the country’s evolution into a 21st-century economic powerhouse. A newly minted class of wealthy collectors is emerging in India, willing to pay the $225,000 or more that top works by Husain and other artists known as Progressives now command. Until recently, 90 to 95 percent of Sotheby’s buyers in this market were Indians living in the United States or United Kingdom, but for September’s sale, 45 percent of buyers were Indians based in India or the Middle East.