Construction of Optimal Portfolio using Sharpe’s Single Index Model

Everyone has the perception that their investments in the stock market should provide the highest possible return, but they neglect to consider the risk factor. Risk and reward are therefore go hand in hand. The goal of an investment is to maximize return while reducing risk, however if investors choose equities, it will have high risk and high return, whereas debt has low risk and low return. In order to achieve the investment goal, a concept known as a portfolio is necessary. Portfolio will achieve the investment’s goal of maximizing return while minimizing risk. Both individual investors and institutional investors find it challenging to build portfolios. So, this study was conducted to construct the optimal portfolio using Sharpe’s single index model. Fifty NSE-listed firms have been chosen for this study. And out of 50 stocks listed in NSE, only three stocks were in the bucket of investment portfolio.