The concept of Modern portfolio management differs from the traditional approach as it uses the quantitative methods to reduce risk of portfolio. Main objective of modern portfolio theory is to have an efficient portfolio, a portfolio that yields the highest return for a specific risk with the lowest risk for a given return. Returns can be increased up to maximum level by having an efficient portfolio, which provides the best result for an investor considering the profile of investor. For example After detailed analysis of some of the 2 scrip’s of interest, an investor could form a portfolio with 5-6 scrip’s (from Durable segments to capital goods and real estate) that was generating good returns with low risk. Again being more curious it may be thought that “Is it possible to earn even more with same risk profile or equal return with low risk profile???” The answer would definitely be yes. Little more effort needs to be plunged in and here comes either higher return or low risk. This is Portfolio Diversification. Diversification manages the risk in better way as it deals with reduction of the risk in a systematic manner. With the help of a proper managed and diversified Portfolio not only the return are maximised, but also the risk of sudden falling in the market value of the investment is managed. This article is an attempt to study the diversification with the context of Indian Investor’s look out and considering the investor’s need in an Indian Market. However this is also important here that Diversification is not limited to Portfolio Diversification, but also expands to beyond this and many types of diversification now exist. 

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Keywords: Investments, Portfolio, Diversification, Return, Risk, Volatility, Management.