Into the index for the first time will go ARM Holdings, the computer- chip designer, and CMG, the Anglo-Dutch computer services group.
Out will go British Energy, the utility, and either Severn Trent or Associated British Foods, Garry Weston's food company that includes famous brands such as Silver Spoon sugar and Twinings tea.
ARM Holdings is now valued at a scarcely credible pounds 6.3bn, making it bigger than household names such as British Airways and ICI. Yet it was only spun off from Acorn, the computer group, a couple of years ago. CMG has an even lower profile, yet its stock market value is now pounds 5bn.
The promotions and relegations will be announced this afternoon by the FTSE International committee, and will come into effect on 20 December. The list of winners and losers will show again that the UK market is polarising between a few growth stocks in growing sectors and the rest.
The FTSE 100's surge to 6,694, although it was down 48 yesterday, has been fuelled entirely by a few stocks in sectors such as telecoms, information technology and oil. Top names such as Marks & Spencer, Great Universal Stores, Bass, Whitbread and J Sainsbury have not just missed out on the party - they have slid close to 12-month lows.
A glance through the best and worst performing sectors on the stock market this year tells the tale. The best performer by a country mile is the IT hardware sector, which is up by a staggering 661 per cent. It is followed by strong performances from IT itself, software and electronics.
But the traditional, consumer spending-related sectors have had a terrible time. Breweries, supermarkets and food manufacturing - indeed any mature market reliant on the spending of increasingly canny consumers - has been hammered.
A look at the best performing unit trusts adds to the view that only technology matters in investment terms at the moment. The top performing funds over three, five and 10 years are all technology based. Over 10 years for, example, pounds 1,000 invested in Aberdeen Technology would now be worth pounds 15,220. Henderson Global Technology and Scottish Equitable Technology have recorded eight and nine-fold gains over the same period respectively. Try matching that with your tracker fund.
The reasons for the polarisation have been well documented. The expansion of mobile phone and Internet penetration has led to a feeding frenzy among investors around the world. No one wants to miss out on the "craze". The huge surge in the hi-tech-dominated Nasdaq market in the United States has been a major factor. This has been exacerbated in the UK by the relatively small number of Internet stocks available.
Also, the impact of merger activity - such as BP's merger with Amoco and Vodafone's deal with AirTouch - has forced institutions' tracker funds to increase their holdings in these mega-stocks.
The question, more and more, is; can this go on? John Hatherly, head of research at M&G, reckons it can and will. "People have looked at the US economy, with its low inflation and high growth, and really do believe in the new paradigm. What is driving that? It's new technology.
"IT stocks are the agents of change of the new economy. This is not like tulip mania - people have got to use the Internet. Investors have been waking up to the new economy and realising that they have to be part of it or they will underperform."
Mr Hatherly cautions that there may be a correction, but that the longer- term trends will still be upward. "The further prices rise, some people will start to take profits. If the balance between supply and demand also changes, things could level off. But many funds are structurally underweight and feel vulnerable. What do they do - sit on the sidelines or pile in? " M&G set up a Global Technology unit trust fund in mid-October and has seen it rise by almost 50 per cent already.
Will Braman, chief investment officer at Barings Asset Management, says the past few weeks have seen a herd instinct take over among fund managers. "In the last 30 days there has been a capitulation among fund managers. They have bought these stocks whether they have liked them or not."
3i, the capital group that has seen its share price double this year, has stakes in about 600 technology companies. Every time it holds meetings with existing or potential new investors, its directors say they are asked the same question every time. "What new technology companies are you invested in?"
Mr Braman at Barings says fund managers also ask for new technology tips for their personal share portfolios. But he too adds a note of caution: "Yes this can continue, but it will probably reach a point - not that far off - where there will probably be a correction."
Paul Kleiser of Scottish Equitable has seen the value of its technology fund quadruple since the start of the year, helped by rising values and new investment piling in. Does he think a correction is near? "I don't necessarily think so." He thinks there could be further surges in the new year when any residual fears about the year 2000 computer bug will have subsided.
By then, fund managers who have missed the boat will be looking at some very poor performance figures for 1999 and their trustees may start asking questions. "It is difficult," one fund manager says. "No one wants to stand up in front of trustees and try to explain why they are holding all these stocks that have no earnings. But they don't want to stand up and explain whey they have drastically underperformed either."Reuse content