Construction of Portfolio Using Sharpe Index Model with Reference To FMCG Industry in India

Abstract

Today the avenues for investment are abundant like bank deposits, property, insurance, shares etc. but taking an investment decision has becom e more critical. The risk associated with every investment option and evaluating the return out of that investment becomes very crucial. The 'risk and return analysis relevant in this circumstance. We are using sharpe index model for the risk and return calculation and portfolio construction. Sharpe's single index model is based on the assumption that stocks vary together because of the common movement in the stock market and there are no effects beyond the market. We have selected nine companies from FMCGS industry which plays an important role in propelling Indian growth engine. The stock prices were taken from the S&P CNX Nifty the stock price for the period 2004-2009. The main objectives are to calculate the beta and variance to help the investors to arrive at a decision of investing in the shares which offer maximum return with minimum risk and also to gain knowledge of the stock market. The findings and suggestion certainly would be helpful to investors.