Portfolios from BSE 500 using CAPM

The study tries to practically use the widely taught Capital Asset Pricing Model (CAPM) model for making investment decisions on Bombay Stock Exchange (BSE) –500 Index. Using CAPM, the study tries to investigate whether securities on BSE 500 are over-valued, properly valued or under-valued. The study also tries to understand that whether undervalued equities belong to a particular industrial sector or diversified sectors enabling creation of a diversified portfolio. A novel way of creating portfolios using systematic risk as weight has been discussed towards the end of the paper. The study is expected to be useful to institutional investors, portfolio managers and retail investors