Portfolio construction is an important process of the investors for investment in the equity market. A good combination of a portfolio will give a maximum return for a particular level of risk. This research tries to construct an optimal portfolio in Indian stock market by using the Sharpe’s single index model. In this research, top 25 stocks out of 100 stocks of Sensex have been selected on the basis of their market capitalization. The data for all the stocks for the period from January 2009 to December 2019 have been considered. The proposed method formulates a unique cut-off rate and selects those stocks or securities to construct an optimal portfolio whose excess return to beta ratio is greater than the cut-off rate. Then, the proportion or weight of investment in each of the selected securities is computed on the basis of beta value, unsystematic risk, and excess return to beta ratio and cut-off rate of each of the securities is concerned. 

 

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