High R&D spenders beat market with 23.5% returns in 5 years: Report
Synopsis
A new Monarch AIF report reveals that 130 companies growing R&D spend at over 20% CAGR returned 23.5% annually versus 13.7% for the NSE 500 TRI — and a tighter cohort of high-intensity spenders more than doubled the index. With India's corporate R&D ratio actually shrinking since FY16 and GERD at just 0.84% of GDP, the data frames under-investment in innovation as a market opportunity hiding in plain sight.
Key Takeaways
130 companies with R&D CAGR above 20% between FY21 and FY26 delivered average stock-price CAGR of 23.5% , versus 13.7% for the NSE 500 TRI .
27 companies spending over 2% of sales on R&D achieved 32.5% CAGR — more than double the benchmark.
India's GERD stood at ₹2.45 lakh crore in FY24 , equivalent to 0.84% of GDP .
Only 28 of over 2,000 listed Indian companies spend more than 5% of sales on R&D.
Average corporate R&D as a share of sales fell from 0.64% in FY16 to 0.56% in FY26 .
Monarch AIF says India must raise GERD to nearly 2% of GDP to achieve its 2047 developed-economy goal.
Companies that significantly ramped up research and development (R&D) spending over the past five years have delivered markedly stronger stock-market returns than the broader market, according to a report released on Monday, 2 November 2026. The study by Monarch Alternative Investment Fund (AIF) also noted that India's Gross Expenditure on Research and Development (GERD) stood at ₹2.45 lakh crore in FY24, equivalent to 0.84 per cent of GDP.
Key Findings: R&D Growth and Market Outperformance
The Monarch AIF report identified 130 companies that grew R&D expenditure at a compound annual growth rate (CAGR) of over 20 per cent between FY21 and FY26. These firms generated an average stock-price CAGR of 23.5 per cent from April 2021 to September 2026, compared with just 13.7 per cent for the NSE 500 Total Return Index (TRI) over the same period — an outperformance of nearly 10 percentage points.
The report stressed that sustained investment in innovation can create long-term shareholder value, even if it weighs on near-term earnings. This finding adds weight to a growing body of evidence that R&D-led business models tend to compound more durably than cost-optimised ones.
High R&D Intensity: An Even Sharper Edge
The outperformance was even more pronounced among companies that combined rapid R&D growth with high R&D intensity. Nearly 27 companies that spent over 2 per cent of sales on R&D on a three-year average basis delivered a stock-price CAGR of 32.5 per cent — more than double the NSE 500 TRI and approximately 9 percentage points above the broader high-R&D-growth cohort.
'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,' said Abhisar Jain, Head and Fund Manager at Monarch AIF.
India's R&D Landscape: Limited but Critical
The report highlighted the limited prevalence of high R&D intensity among India's listed companies, pointing to significant untapped potential. Of more than 2,000 listed companies, only 28 spend over 5 per cent of sales on R&D, while just 59 companies exceed the 3 per cent threshold.
Notably, average R&D expenditure as a proportion of sales across Indian corporates has actually declined — from 0.64 per cent in FY16 to 0.56 per cent in FY26 — suggesting that the innovation gap is widening rather than closing at the broader market level.
The Gap With Global Peers and the 2047 Target
India's GERD at 0.84 per cent of GDP lags significantly behind advanced economies. Jain noted that India 'urgently needs to emulate economies like the US, China and Europe and increase its R&D spend as per cent of GDP to nearly 2 per cent' if it is to realise its ambition of becoming a developed economy by 2047.
This comes amid a broader national conversation about industrial competitiveness, with the Centre having signalled intent to boost innovation through various production-linked and technology-development schemes. Whether corporate India accelerates R&D investment in response — or continues to prioritise short-term margins — will be a key variable in India's economic trajectory over the next decade.
Point of View
Yet aggregate R&D intensity has been declining for a decade. The market is signalling that innovation compounds; management committees are not listening. With GERD at 0.84% of GDP against a 2% aspiration, and just 28 listed companies crossing the 5%-of-sales threshold, India's innovation gap is structural — not cyclical. Closing it will require more than policy nudges; it will require boards to stop treating research as an expense line to be managed and start treating it as the asset it demonstrably is.
NationPress
2 Nov 2026
Frequently Asked Questions
Which companies outperformed the market due to high R&D spending?
According to the Monarch AIF report, 130 companies that grew R&D expenditure at a CAGR of over 20% between FY21 and FY26 delivered an average stock-price CAGR of 23.5% — nearly 10 percentage points above the NSE 500 Total Return Index. The report did not name specific companies but identified the cohort by R&D growth rate and intensity.
What is India's current R&D spending as a share of GDP?
India's Gross Expenditure on Research and Development (GERD) stood at ₹2.45 lakh crore in FY24, equivalent to 0.84% of GDP. Experts cited in the report say India needs to raise this to nearly 2% of GDP to meet its developed-economy target by 2047.
How does high R&D intensity improve stock returns?
Companies spending over 2% of sales on R&D on a three-year average basis delivered a stock-price CAGR of 32.5% — more than double the NSE 500 TRI. The Monarch AIF report argues that sustained R&D investment helps companies build differentiated products and long-term competitive advantages that translate into shareholder value.
How widespread is high R&D investment among Indian listed companies?
It is limited. Only 28 of more than 2,000 listed companies in India spend over 5% of sales on R&D, and just 59 exceed the 3% mark, according to the Monarch AIF report. Average corporate R&D as a share of sales has also declined from 0.64% in FY16 to 0.56% in FY26.
Why is India's R&D spending considered insufficient?
India's GERD of 0.84% of GDP is significantly below that of major economies such as the US, China, and European nations. Monarch AIF's fund manager Abhisar Jain has stated that India must close this gap to nearly 2% of GDP if it is to achieve its Viksit Bharat 2047 ambition of becoming a developed economy.
