Volume 20 No 20 (2022)
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A Study on Construction of Optimal Portfolio for Selected Stocks using Sharpe’s Single Index Model
Dr. Santhapalli Gautami,Dr B.Sankar Naik, N.Venkateswara Reddy,
Abstract
Security analysis and portfolio management have emerged as the most concerning aspect of rational investment and decision-making. A portfolio is a mixture of securities such as stocks, bonds and other money market instruments. The process of unification of the broad asset classes to obtain the best return with the least risk is called portfolio construction. Portfolio performance analysis consists of examining the risk-return characteristics of the portfolio.The study emphasises the impact of selected stocks for optimal portfolio returns on the market returns in the NIFTY index, the result of an optimal portfolio by using Sharpe’s single index model. In this study, the stocks from the different metal companies are included since these sectors are of prime importance for the real growth of an economy. Using the Sharpe Single Index model, to build an optimum stock portfolio among selected stocks belonging to the top trading companies in India. And calculate the proportion of investment to be made into each of the select stocks that are included in the optimal stock portfolio and find out the excess return to beta value ratio, by giving ranking stocks and then evaluating the cut-off point. The study finds and suggests the investors and top-level management by revealing that two companies are in the optimal portfolio: Adani Power with a proportion of 77.90% and Jindal steel with a proportion of 22.10%.
Keywords
portfolio construction, optimal portfolio, Sharpe’s single index model, Adani Power, Jindal steel, Beta, Risk Return
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