Investment is a commitment of funds to one or more assets with the expectation to enhance future wealth. In the recent past decades, investment in stock market is the one investment vehicle that has truly come of age in India. The risk-return relationship is a fundamental concept in not only financial analysis, but also in every aspects of life. It plays a universal role in our lives and the relationship between risk and return has been subjected to extensive theoretical and empirical enquiry. However, such relationship needs to be measured in order to develop an effective investment strategy. The present study has been made to analyse the risk-return relationship as well as the behaviour of investors about investment in stock market. The study used a sample of 140 firms of Bombay Stock Exchange 500, which have got the daily data consecutively for ten years from 1st January 2003 to 31st December 2012 and also primary data for analysing the investors' perception about investment in stock market. The findings of the study will enable improve the stock returns of firms and also the investors' investment decision, therefore they have implications for both investment and policy making