Optimal portfolio construction using sharpe's single index model - A study of selected stocks from BSE

To make wise decisions in investment, there is a need for knowledge on security analysis and portfolio management. A rational investor aims at attaining maximum return with minimum risk. As the scope of investment avenues with varying degrees of risk is vast, the scope of the present study is relating to equity portfolio construction with selected stocks from the BSE. Constructing an optimal portfolio is a challenging task for the individual as well as the institutional investors. This study is aimed at creating awareness in the minds of investors regarding the utility of Sharpe's Single Index Model in portfolio construction. The Indian investors also may reap the benefits of Sharpe's Single Index Model (SIM) as the number of companies traded in the stock exchanges is increasing year after year. Fifteen companies from the S&P BSE Sensex index were selected for the study. Among the fifteen sample companies, only four were selected for optimal portfolio using SIM. The results of the present study and such micro level studies have more utility value to the fund managers.