Digital watermarking and data hiding have gained popularity in recent years as a means of protecting digital images from theft, illegal copying and unlawful reproduction. Some digital watermarking algorithms were proposed using spatial domain and transform domain techniques. The transform domain could be DFT, DCT, DWT or SVD. Several digital watermarking algorithms using genetic algorithms are available in the literature. In this paper, a novel optimal watermarking scheme based on singular value decomposition using genetic algorithm (GA) is proposed. The proposed scheme is based on step size optimization using the genetic algorithm to improve the quality of watermarked image and robustness of the watermark. The proposed algorithm is more secure and robust to various attacks, viz., low pass filtering, median filtering, JPEG compression, resizing, row-column blanking, row-column copying etc. Superior experimental results were observed with the proposed scheme over a recent algorithm proposed by Chandra Mohan et al. in terms of normalized cross correlation (NC) and peak signal to noise ratio (PSNR).