A Study on Construction of Optimal Portfolio Using Single Index Model at Karvy Stock Broking Ltd, Bangalore.

Abstract

This study has made with the intention of constructing an efficient optimal equity portfolio using the effective and very more popular utility of Sharpe’s Single Index Model. In order to get more knowledge about the Indian securities market the Internship was done in one of the stock brooking agency called Karvy Stock Brooking Ltd. As an Investor and the fund managers know Indian Securities market is high volatile, risky and highly sensitive. The portfolio construction with the help of Single Index model became necessity to minimize the risk and to maximize the return on investment. This study is targeted to create awareness in the minds of investors. Here for the study out of 50 companies only 8 companies were selected for the portfolio construction. The selection of securities is made based on the return and excess return to beta ratio. Excess return to beta ratio is identified by comparing the excess return in to the particular stock’s beta. Standard deviation is the process where it is used to measure the variability of the securities and the relationship of the mean variable of the securities for the selected stock.