Market Report: Second liners take charge as rally steams on

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THE OFTEN neglected second liners are outperforming blue chips as the stock market's merry romp continues.

When shares started their dash-for-growth rally on Tuesday blue chips made the running, with the FT-SE 100 index comfortably outpacing the recently introduced FT-SE 250 index.

But the second liners caught the blue chips on Wednesday and yesterday overtook them.

This week's advance is therefore much more broadly based than other rallies, such as the election upsurge, that have occurred this year.

The performance of the two indices indicates that many investors feel top shares have been driven high enough but the second liners are still worth seeking out. Such an approach indicates that the present rally could have more substance than this year's forerunners.

The 100 index, still the recognised barometer of the market's performance, was up 12.4 points to 2,658.1 after at one time scoring a 36.2 gain. The 250 gain was 30.4 at 2,494.6.

Helping retard the 100 index was the sluggish performance of drug and utility shares.

The three leading drug shares suffered as Glaxo Holdings' asthma drug, Serevent, attracted critical US comment. It sent Glaxo tumbling 19p to 776p. SmithKline Beecham and Wellcome gave ground in sympathy.

But Fisons underlined the 'ill wind' approach. Thoughts that Glaxo's problems could make it easier for Fisons' asthma drugs and hopes that the US authorities will re-approve its eye drug pushed the shares 9p higher to 224p. Support from Barclays de Zoete Wedd was also evident.

It was the first Fisons advance for a long while not accompanied by takeover talk. However, speculative interest is rarely far from the drugs group and is expected to rear again soon.

Waters were overlooked but power shares were again under pressure as the Government's dilemma over the coal industry cast a deepening shadow.

SG Warburg made cautious noises and Kleinwort Benson lowered its dividend growth projections. Among distributors Eastern fell 14p to 366p and Seeboard 17p to 395p. But the generators National Power and PowerGen were firm.

Royal Insurance rose 9p to 216p on vague takeover speculation. But a more significant influence was bullish noises from David Hudson, the former BZW analyst who after three months out of the market has arrived at Credit Lyonnais Laing.

He believes higher premium rates are feeding through to profits far more quickly than expected. Hurricane Andrew could force US rates up and, although mortgage indemnity remains a problem, the trend to lower interest rates is beneficial.

County NatWest took the shine off the BTR conglomerate, down 1.5p to 502.5p, by suggesting a switch into Hanson, up 2.5p to 232p.

Unilever lost 17p to 1,077p as Hoare Govett and Panmure Gordon suggested that advantage should be taken of recent strength and some profits taken.

Salomon Brothers forecast third-quarter profits, due next month, will be up 11 per cent to pounds 580m.

The engineer Babcock International, hit by profit downgradings recently, advanced 3.5p to 34.5p as Hoare Govett said buy.

Boots fell 14p to 479p. County and Cazenove did the damage.

Property shares lost some enthusiasm as Kleinwort Benson and UBS Phillips & Drew appeared to turn sellers of Land Securities.

Lucas Industries ended at 105p as Hoare Govett placed 7 million shares. Abbey National rose 5p to 331p with Lehman Brothers apparently placing 7 million.

Costain held at 25p following a 7.5 million agency cross at 24p and Associated Fisheries jumped 21p to 145p in response to a 452,000 cross at 125p.

Redland dipped 6p to 341p after James Capel sold a million shares at about 348p. Saatchi & Saatchi gained 7p to 150p. FMR Corporation has lifted its stake above 3 per cent.

NMW Computers crashed 23p to 18p, the surprise level of an agreed offer from ACT Group. TSB Group rose 5.5p to 142.5p as takeover rumours continued to swirl.

Anglia Television improved 14p to 179p. Hopes are growing that neighbouring Central Independent TV will mount an agreed bid.

British Airways climbed 5.5p to 309p, awaiting today's deal with Davies & Newman.

The leisure group Baldwin rose 11p to 74p following the failure of a bid to block gaming licences for London Clubs, where it has a stake.

The newcomer Linx Printing Technologies reached 144p against a 130p placing price.

Blue chips failed to hold their best levels yesterday. At one time the FT-SE 100 index was up 36.2 points. It closed with a 12.4 gain at 2,658.1. The increasingly neglected FT 30 index ended 18.5 up at 1,969.8. Trading was again heavy, with turnover reaching 727.9 million shares and 29,944 bargains completed

Smith New Court is due to start making markets in another 44 shares in small companies today. Since UBS Phillips & Drew, County NatWest and SG Warburg cut their market-making books, SNC has taken on 85 companies faced with being relegated to the Bulletin Board. With Winterflood Securities SNC says it intends to narrow spreads 'wherever possible'.

Speculation is strengthening that Lloyds Chemists will soon attract takeover attention. The shares enjoyed another flurry yesterday, climbing 18p to 218p in active trading. As if aware of the danger, Lloyds is said to be holding meetings with its institutional investors. Kingfisher is the favourite to pounce; but some wonder about Tesco or another supermarket group.