Market braced for relegation of technology stars from FTSE 250 index

Dealers are bracing themselves for a dramatic clear-out of the FTSE 250 when the mid-cap index is reshuffled next week. More than a dozen technology stocks are poised for demotion to small-cap status.

Dealers are bracing themselves for a dramatic clear-out of the FTSE 250 when the mid-cap index is reshuffled next week. More than a dozen technology stocks are poised for demotion to small-cap status.

High-profile casualties include Infobank, the e-procurement software group, Filtronic, the telecoms equipment manufacturer, and Atlantic Telecom.

Bargain hunting triggered a rally from New Economy stocks yesterday, but it is likely to have come too late for most. There are just two more trading days before the quarterly review.

Figures from FTSE show that, were the decisions to have been made on the basis of market capitalisations last night, 17 stocks would be kicked out of the FTSE 250. The index measures the 250 next biggest companies after the FTSE 100.

The mid-cap index has fallen 7 per cent since the last rejig in September as fears over slowing global growth prompted a widespread sell-off of technology and telecoms stocks.

The heaviest falls from grace, though, have been by companies with more specific problems. Torotrak is no longer even in the UK's top 500. Its shares lost 60 per cent in a day when it said a development partner, Toyota, could not get its variable transmission technology to work.

The stocks being demoted lose their place in the FTSE 350, an aggregate of the mid-caps and blue chips, widely used by tracker funds and as a benchmark by active fund managers. When the changes are confirmed on Wednesday, dealers will have nine days before they take effect to plan a reshuffle of fund managers' portfolios.

The quarterly review of all FTSE's UK indices is set to underline the recent rally among retailing stocks, which have become the safe haven. Somerfield and Carpetright are sure to move up in to the 250, while Safeway and, perhaps, Matalan will enter the exclusive FTSE 100.

Old Economy stalwarts Rolls-Royce, Scottish & Newcastle and Associated British Foods are also poised to return to the top flight. The five stocks likely to be ejected from the FTSE 100 are Bookham Technology, Baltimore, Sema, Emap and P&O Princess.