Market Report: Small caps frolic in the spotlight

SECOND AND third-line shares are outplaying their Footsie betters. As blue chips experienced yet another volatile session, the undercard continued to recover from the depths of despair experienced last year.

The mid cap index jumped 65.3 points to 5,024.2, the first time it has topped 5,000 since August. And the small cap rose 16.1 points to 2,131.2.

Growing takeover activity is a major influence. Bids are flowing with almost monotonous regularity, exposing the hidden value of many smaller companies.

Chemical group Albright & Wilson is the latest to admit it has attracted predatory attention. The shares jumped 23p to 99.5p, their highest since August, after the company said it had received "a number of tentative approaches", but they did not include any proposals from the group's management.

In many instances managers, depressed by the value the market has put on their companies, have mounted management buyouts. They believe they know their companies - and their value - better than the market and have been prepared, by borrowing and enlisting the help of venture capitalists, to let their money do the talking. Other undercard companies have used share buybacks to illustrate the belief that the market has it wrong.

Although such corporate activity has been going on for a long while, it is only this year, when the smaller fry have outperformed blue chips, that the message seems to have filtered through to investors.

There are even signs that some institutional investors, which have ignored the under card, are relenting and starting to pick up stock.

Hard pressed sports retailer, JJB Sports, led the smaller-cap march. The shares jumped 52.5p to 362.5p on the belief that the worst is over and the shares can start to head back towards their 819.5p peak.

Engineers, spurred by the rush of takeover activity, moved ahead with Bodycote up 62.5p to 850p and Senior Engineering, which met analysts on Thursday, 6p to 121.5p: CSFB reckon it is worth 140p a share.

Takeover speculation lifted Brands Hatch, the motor racing group, 8p to 173.5p and Regent Inns 16.5p to 169p. Hepworth, the building materials group, rose 9p to 148.5p with HSBC suggesting the shares were 25 per cent undervalued.

Footsie ended 23.5 points higher at 5,896. It swung between a 69.2 gain and a 40.5 fall, with New York's behaviour the dominating influence in the afternoon. Trading was heavy, with turnover above 1.1 billion shares.

Securicor was the most wanted Footsie constituent, gaining 42.5p to 631.25p as the market prepared for BT to ring the changes at the Cellnet mobile phone group. BT, with 60 per cent of Cellnet, has been anxious to buy Securicor's 40 per cent interest but has been thwarted by Westminster.

Now the Department of Trade & Industry has given BT more flexibility to compete in the mobile phone market. It is to be allowed to bid in the next licensing round and, if it desires, buy full control of Cellnet. BT firmed 3.5p to 930.5p.

Mike Smith was given a muted reception as chief executive of struggling Rank leisure group; the shares fell 7.5p to 200p.

WPP, the advertising group, rose 27p to 458.5p on the theory that it had been left behind in the recent media surge.

Diageo's $192m food sale produced a 35p gain to 672p. Banks were higher, with Barclays up 61p to 1,360p.

ICI - year's results next week - put on 18p to 543p and BAA, also reporting next week, added 20.5p to 723p. Independent Energy, the electricity and gas supplier, flared 40p to 717.5p, a peak: interim results are next week.

Racal Electronic, meeting institutions next week, rose 4.5p to 387p. Premier Farnell added a further 11p to 202p on its restructuring plans.

Poor trading reports had a predictable impact. Allders, with festive sales down, fell 4.5p to 108.5p. Building materials group Lilleshall, forecasting a pounds 2.7m loss, gave up 20.5p to 47.5p, and talk of a "less buoyant" market left Partridge Fine Arts 11.5p off at 62.5p. Others piling on the gloom were Banner Chemical, off 2.5p at 8.5p, and TGI, down 7p at 33p.

Builders were helped by Bryant's figures on Thursday and upbeat comments from Ward. Persimmon rose 14p higher to 182p and Bellway 16p at 265.5p. Ward was 3.5p higher at 31.5p.

Langdons Foods, planning to raise cash through a share placing, was unchanged at 1.5p.

Some Internet shares were given a further upwards whirl. Freepages, linking up with Flextech, put on 4.5p to 32.5p, and Internet Technology gained 4p to 168p.

SEAQ VOLUME: 1.1 billion

SEAQ TRADES: 74,171