Carnarvon Petroleum Ltd (ASX:CVN) has featured twice in the quarterly S&P Dow Jones Indices rebalance, entering the All Ordinaries (INDEXASX:XAO) and the S&P/ASX 300 (INDEXASX:XKO).
The company’s recent oil and gas discovery means that it is 1 of 10 companies added to the ASX 300 index.
WATCH: Carnarvon Petroleum advancing Dorado and Buffalo projects
Meanwhile, Auscann Group Holdings Ltd (ASX:AC8), Bellevue Gold Ltd (ASX:BGL), and Paradigm Biopharmaceuticals Ltd (ASX:PAR) have all been added to the All Ordinaries Index.
Additional to indices can be a catalyst for stocks
The addition to an index can create liquidity for stocks.
This is because certain larger institutional investors have rules for which stocks they can and can’t own in their portfolios.
An Australian fund manager, for example, might only be able to buy stocks that are big enough to be in the All Ordinaries or ASX 300.
There are also ETFs that track or mimick various indices, take the Vanguard Australian Shares Index ETF (ASX:VAS) for example, it seeks to track the return of the S&P/ASX 300 Index.
Because it seeks to track the ASX 300, this means it will now have to buy shares in Carnarvon because it is set to become a member of the ASX 300.