An empirical study on construction portfolio with reference to BSE

Abstract

The main thrust of this study is to construct optimal portfolio using Sharpe single index model with reference to BSE Sensex. Portfolio construction is an important process for the investors/ portfolio managers in the capital markets. In this paper we made an attempt to apply Sharpe single index model to BSE Sensex 30 stocks. In order to construct the portfolio of BSE Sensex 30 stocks with 5 years data i.e from June 2016 to July 2021 have be considered. The proposed method formulates a unique cut-off rate and selects those securities to construct optimal portfolio and whose excess return to beta ratio is higher than the cut-off rate. Study found that nine stocks included in optimal portfolio and highest weightage of funds allocated in Drreddys Labs. It is concluded that the pre and post Covid-19 period Pharmaceutical and Financial services companies posted reasonable returns and highest risk in the study period.