Elan may be admitted to the Morgan Stanley Capital International (MSCI) index of leading European shares, which is to be redrawn next week.
Such a development would boost demand for its stock because investors who track the index would have to include the Dublin pharmaceuticals firm in their portfolios.
Stock market traders believe the company could expect to be included in the index for the first time because the sharp increase in its market capitalisation, which has doubled since the start of 1998.
It now accounts for about 23 per cent stocks held on the Dublin exchange.
The finalisation of its $1.8 billion acquisition of a San Diego-based drug firm Dura next Thursday will increase this to 25 per cent, with an issue of more than 30 million new Elan shares to Dura shareholders.
According to one Dublin trader, membership of the MSCI is very likely because such indices try to replicate weightings in local exchanges.
He said: "It will force fund managers to take a much stronger position on the stock. If it happens there will be a tidal wave of money into Elan."
Such a development could also prompt more investors to buy Elan shares on the Dublin exchange, reflecting the construction of the index's weighting.
The trader said: "If it were to join the index people would be obliged to hold the local stock."
At present, 80 per cent of its shares are held in the US, where it is quoted on the New York stock exchange. This is a legacy of the period in the 1980s and 1990s when Elan was a relatively small company spurned by Irish institutional investors. That situation has changed although Irish institutions have increased their holding of the stock.
The MSCI index will be redrawn after a meeting in Geneva of MSCI's monitoring committee, which will assess the performance of European shares. A spokeswoman said it had no comment to make on the likely composition of the index before then.
It is thought that Elan would be very keen to join the index although its spokesman also declined to comment.
Analysts believe the Dura acquisition will substantially increase its sales and marketing infrastructure in the US as well as expand its therapeutic areas of interest to include respiratory, anti-infective and dermatology products
Last month, Elan reported a 70 per cent rise in pre-tax profits to $154 million (€183 million) in its third quarter - an increase from $90.4 million in the corresponding period last year.
Its chairman and chief executive, Mr Donal Geaney, has said the Dura deal would add to earnings next year. This would double the size of Elan's US sales force to more than 1,000 representatives and add more than $300 million of sales revenue in 2001, he said in September.
In addition to the Dura deal, Elan's £52 million sterling takeover of a British firm, Quadrant Healthcare, was effectively sanctioned last week when the US company, Inhale Therapeutic Systems, which made an initial offer, signalled this had been withdrawn.
