Recovering Alcatel-Lucent seen rejoining France's CAC 40 By Blaise Robinson and Alexandre Boksenbaum-Granier PARIS (Reuters) - Alcatel-Lucent could rejoin France's blue-chip CAC 40 index next month as the telecom gear maker's turnaround gains traction and its stock hits two-year highs, analysts and fund managers said. If restored to the CAC 40, Alcatel would benefit from demand from index trackers of about 255 million euros, or 81 million shares, equivalent to two average days of volume, Exane BNP Paribas index analyst Christophe Wakim said. Alcatel - a founding member of the CAC 40 when the benchmark was created a quarter century ago - was kicked out of the index a year ago. It is expected to replace chipmaker STMicroelectronics, whose shares have lost 24 percent over the past six months as the company grapples with weakening demand from Asian smartphone and electronics makers. Alcatel, which makes equipment for big telecom groups like AT&T and Orange, had been stuck for years in a downsizing spiral as it struggled with stiff competition from low-cost Chinese rivals and weak demand from customers. As a result, its shares plummeted to a record low of 0.67 euros in October 2012. But the arrival this year of a new chief executive and an aggressive turnaround plan - which included 10,000 job cuts, 1 billion euros ($1.36 billion) of cost savings and 1 billion euros of asset sales - has sparked recovery hopes for the company, with its shares tripling since early May. "Rejoining the CAC would give back visibility to the group and would give credence to the company's turnaround strategy," said Frédéric Rozier, management advisor at Meeschaert Gestion Privée, in Paris. The NYSE-Euronext indexes committee that manages the CAC 40 gathers every quarter and, although the exact dates are not publicly disclosed, is expected to meet next week. The two official criteria for inclusion are the free-float adjusted market capitalization and a stock's trading volume. A Paris-based spokeswoman for Euronext declined to comment. Alcatel-Lucent is the best candidate for CAC 40 inclusion. It's ahead of Dassault Systèmes, SES, Sodexo and Valeo," Exane's Wakim said. Alcatel's free-float stands at 8.2 billion euros, including the capital increase set to be completed on November 29, which places the group at the 30th position among French-listed companies, according to Thomson Reuters data. Dassault, SES, Sodexo and Valeo have free-floats of between 5.5 billion euros and 7.3 billion euros. Shares listed in benchmark indexes such as the CAC 40 usually see strong demand from brokers offering index-tracking products and from funds benchmarked to the index, meaning that Alcatel's reintegration in the index could boost the stock. Reporting by Blaise Robinson