This paper explores the association between a firm's R&D spending and its future returns. Unlike the US firms, which can only expense R&D, Australian GAAP permits firms to either expense or capitalize their R&D expenditure. India is following Ind AS 38 which requires research expenditure to be recognized as expense and development expenditure to be recognized as an intangible asset if, and only if specified criteria are met, otherwise shall be recognized as an expense. Hence, Indian setting provides for the use of both methods of accounting either expenser or capitalizer. However, less research is available that relates R&D spending of a firm to its future returns. The present study tries to find out the relationship between R&D expenditure and its future returns for R&D active Indian firms. The study is based on 15 years (2001-2015) CMIE data selected from those companies which have R&D activities during the span of the sample period. The market impact of the R&D intensity of all R&D active firms, 'capitalizer's and 'expenser's has been examined separately. The results suggest that capitalized portion of R&D is capable of generating more future returns. Expensed portion of R&D is not strongly associated with future holding period returns. However, it is observed that the firms who expensed their total R&D expenditures perform better in comparison to the firms who capitalized their total R&D expenditures. [ABSTRACT FROM AUTHOR]