THE FTSE-100 Share Index is the most closely watched stock market

indicator but there are times when it does not give a true picture of

what is happening, and this has particularly been the case lately.

The FT-Actuaries All-Share Index is the one against which funds

compare their performance over the long term but it does not reflect the

greater volatility of the larger capitalisation stocks.

However, with the new indices -- the FTSE Mid-250 and FTSE Actuaries

350 -- it is possible to have a better idea of where the larger stocks

are going.

The 100 share index is undoubtedly an improvement on the old FT-30

Share Index but can

still be distorted by its components.

The index is simply the largest 100 companies by capitalisation and

every quarter it is assessed and there are usually some substitutions to

be made.

While all the 100 are major companies there is still a wide variation

in size between the top and bottom.

The two biggest capitalisation stocks, BT and Glaxo, account for a

tenth of the index and overall the top 20 account for over half the

index.

Pharmaceuticals are strongly represented with SmithKline Beecham and

Wellcome, in addition to Glaxo, and they have all been under a cloud as

a result of the more aggressive line which the Clinton administration

will take on drug prices. So they have been depressing the index.

Similarly, oils are a major influence (with BP, Shell and British Gas)

and they have been under pressure by weak oil prices and in British

Gas's case by its regulator.

Last year the 100 share index exaggerated the strength of the

underlying market because its constituents derive a large proportion of

their earnings from overseas and because the largest companies were

expected to benefit first from any recovery in the UK economy.

Following Britain's exit from the ERM in September these stocks

powered ahead because their profits were immediately guaranteed a boost

because

of the currency translation

effect.

Until December the market as a whole did not perform as well as the

top 100 shares. Only in that month did the rest of the market catch up

and in the new year the situation was reversed with smaller

capitalisation stocks taking up the running because it was realised they

had been left behind and had greater operational gearing to economic

recovery. This was not much apparent at that point but even then the

market was looking towards the second half of the

year.

The FTSE Mid-250 takes in the next 250 stocks in terms of

capitalisation and on a comparative basis there was a crossover between

this index and the 100 share index in January, with the 250 taking the

lead and this has persisted well into 1993.

The 100 and 250 indices combined make up the FT-Actuaries 350 index

which clearly gives a better overall view. However, it will not show how

small companies are performing.

This is the job of the FTSE SmallCap Index which comprises at least

500 companies capitalised at between #20m and #150m. It is calculated

with and without investment trusts and is at

times bound to be at variance

to the indices tracking larger

stocks.

To get the real picture there is little alternative but to follow the

100, 250 and SmallCap.