Construction of Optimal Portfolio Using Capital

Asset Pricing Model(CAPM) for BSE Top 15

Securities on the weekly data from 1st Aug 2021 to
1st Aug 2022

SUBMITTED BY:
SUBMITTED TO: Dr. Laxmi Pandey
NARESH BHARDWAJ (BM- 021113)
MONIKA BANSAL (BM- 021111)
AJAY SHARMA
AYUSH GUPTA
PRACHI ( BM- 021124 )
SOURAV VERMA
 PORTFOLIO
• Portfolio is the combination of securities such
as stocks, bonds and money market
instruments. The process of blending together
the broad asset classes so as to obtain
optimum return with minimum risk if called
portfolio construction.
CAPITAL ASSET PRICING MODEL (CAPM)
• Markowitz, William Sharpe, John Lintner and Jan Mossin provided the
basic structure for the CAPM model.
• It is a model of linear general equilibrium return.
• the required rate return of an asset is having a linear relationship with
asset’s beta value i.e. undiversifiable or systematic risk.
• The assumptions of CAPM are that the market is in equilibrium and the
expected rate of return is equal to the required rate of return for a given
level of risk or Beta.
What are the 4 components of the Capital Asset
Pricing Model CAPM equation?

• CAPM Formula
• Ke → Expected Return on Investment.
• rf → Risk-Free Rate.
• β → Beta.
• (rm – rf) → Equity Risk Premium (ERP)
 Tata Communications Limited (Share Price - 1,238.35)

• Risk Free Rate of Return (Rrf) 6.92%

• Market Return (Rm) 13.37%

• Beta 0.922945

• Risk Premium (Rm-Rrf) 6.45%

• Expected Rate of Return (Ra) 12.87%

 Adani Power Ltd (Share Price – 333.45)

• Risk Free Rate of Return (Rrf) 6.92%

• Market Return (Rm) 13.37%

• Beta 0.968

• Risk Premium (Rm-Rrf) 6.45%

• Expected Rate of Return (Ra) 13.16%

 Patanjali Foods Ltd (Share Price – 1435.95)

• Risk Free Rate of Return (Rrf) 6.92%

• Market Return (Rm) 13.41%

• Beta 0.9688

• Risk Premium (Rm-Rrf) 6.49%

• Expected Rate of Return (Ra) 13.20%

 Reliance Industries Ltd (Share Price - 2,527.00 INR)

• Risk Free Rate of Return (Rrf) 25.76

• Market Return (Rm) 10.00

• Beta -0.34

• Risk Premium (Rm-Rrf) -15.76

• Expected Rate of Return (Ra) 2,180.00

 Tata Steel Limited (Share Price - 101.65 INR)

• Risk Free Rate of Return (Rrf) 3.18

• Market Return (Rm) 1.00

• Beta 1.55

• Risk Premium (Rm-Rrf) -2.18

• Expected Rate of Return (Ra) 82.70

 Honda Motor Co., Ltd (Share Price - 3,319 INR)

• Risk Free Rate of Return (Rrf) 8.91

• Market Return (Rm) 1.00

• Beta 0.85

• Risk Premium (Rm-Rrf) -7.91

• Expected Rate of Return (Ra) 3.16

 Maruti Suzuki India Ltd (Share Price - 9,492.55 INR)

• Risk Free Rate of Return (Rrf) 64.57

• Market Return (Rm) 5.00

• Beta 1.57

• Risk Premium (Rm-Rrf) - 59.57

• Expected Rate of Return (Ra) 6,536.55

 vedanta limited (Share Price - 284.85 INR)

• Risk Free Rate of Return (Rrf) 5.57

• Market Return (Rm) 1.00

• Beta 1.87

• Risk Premium (Rm-Rrf) - 4.57

• Expected Rate of Return (Ra) 206.00