CONSTRUCTION OF OPTIMAL PORTFOLIO USING SHARPE'S SINGLE INDEX MODEL - AN EMPIRICAL STUDY ON NIFTY METAL INDEX

While making investment decisions particularly in equity market, risk and return plays an important role perhaps the most relevant question is which stocks should be placed in the portfolio matters a lot. A good combination of equity stocks in the portfolio will give better return for a given level of risk. The main focus of this research is to construct an optimal portfolio in Indian stock market with the help of the Sharpe single index model. In this study, totally 14 metal stocks have been selected from iron and steel industry and these stocks are constituent of the NSE Nifty metal index. The monthly data for all the stocks for the period of January 2012 to December 2016 have been considered. The study reveals that only tow company stocks constitute the optimum portfolio and these are Vedanta and Tata steel with a ideal proportion of investment of 86.37% and 13.62% respectively.