Mumbai, November 2, 2026: Indian listed companies that have consistently increased their research and development (R&D) spending have delivered significantly higher stock returns than the broader market, according to an analysis by Monarch AIF. The study found that 130 companies which grew their R&D expenditure at a compound annual growth rate (CAGR) of over 20% between FY21 and FY26 achieved an average stock-price CAGR of 23.5% from April 2021 to September 2026, nearly 10 percentage points above the NSE 500 TRI’s 13.7% over the same period.
The outperformance was even more pronounced among companies combining rapid R&D growth with high R&D intensity. Monarch AIF reported that 27 companies spending over 2% of sales on R&D on a three-year basis saw an average CAGR of 32.5%, more than double the NSE 500 TRI and around 9 percentage points above the broader high-R&D-growth group.
Few Indian firms show high R&D intensity
Despite these results, Monarch AIF noted that only 28 out of more than 2,000 listed companies spend more than 5% of sales on R&D, while 59 companies allocate over 3%. The findings underscore a limited prevalence of high R&D intensity in India’s listed corporate sector, highlighting the potential for increased investment in research and innovation.
India’s R&D spending lags global peers
Monarch AIF’s report cited India’s Gross Expenditure on Research and Development (GERD) at ₹2.45 lakh crore in FY24, equivalent to 0.84% of GDP, with the private sector accounting for 52% of the total. In comparison, China’s R&D expenditure as a share of GDP rose from 1.2% in CY04 to 2.7% in CY24, while India’s share has remained largely stagnant over the past two decades.
Within the listed corporate sector, average R&D expenditure as a proportion of sales declined from 0.64% in FY16 to 0.56% in FY26, according to Monarch AIF. This suggests that, despite increases in absolute spending, R&D continues to represent a relatively small share of revenue for most listed firms.
Innovation seen as key to 2047 economic goals
Abhisar Jain, Head & Fund Manager at Monarch AIF, said the findings challenge the perception that reducing R&D expenditure to protect near-term earnings necessarily benefits shareholders. “While cutting research costs may improve reported profitability in the short term, sustained investment in innovation can help businesses develop differentiated products, strengthen competitiveness and build capabilities for future growth,” Jain said.
He added that for India to achieve its ambition of becoming a developed economy by 2047, it must increase R&D spending to around 2% of GDP, in line with economies such as the US, China, and Europe. Greater investment in research and the development of home-grown intellectual property, Jain said, can help Indian companies build differentiated products, improve pricing power, and compete more effectively in global markets.
Disclaimer: This article is based on a press release provided by the concerned organisation and has been edited for style and clarity with the assistance of AI tools. BusinessFortnight does not verify, endorse, or take responsibility for the claims, figures, or statements made in the original release.
