The “Smart Grid” modernizes the aging power system and is characterised by two-way flow of electrical power and information within the network. Voltage stability is the prime concern of over stressed power system network. In Smart Grid, the overall voltage profile of the power network can be efficiently improved and thus avoids problems of voltage collapse and resultant blackouts. A simulation work has been done where reactive power requirement at different buses is calculated that improves the voltage profile of the overall network with the proposed approach using voltage sensitivity at the buses and effective locations for reactive power injection within the buses is determined. Also an approach is presented for capacitor bank operation associated to a bus. Voltage stability assessment considering different voltage stability indices is done under different system conditions that give vital information about the network (including weak buses & lines, maximum loading, most secure buses etc.) and these assessments can be very helpful in taking decisions to avoid uneven outages.