Vol. 9, Issue 11, Part A (2023)

Abstract
Investment is an agreement for current outflow of money over a period in anticipation of future inflow that will compensate for changes in purchasing power of money as well as the uncertainty with respect to inflow of money in the future. Risks in investments stem from uncertainty that future return may be different from future expected return. Higher the return expected by an investor, higher is the risk he has to bear. Diversifying investments that is investing in more than one financial asset can reduce risk and increase return. Harry Markowitz and later William Sharpe introduced the Modern Portfolio Theory (MPT) putting forth that by identifying appropriate financial assets, maximizing overall returns within an acceptable level of risk. This case study, using the SENSEX 30 stocks, aims to highlight the benefit gained by investors by diversification of financial assets into a portfolio while elucidating the two models in detail.