At the start of the day Yell shares rose to 306p from 285p in conditional trading - dealing between big city banks ahead of the official start of trade - but by lunchtime had settled back to 292.25p.

The price slid further to close at 289.5p, 1.6% higher than its debut.

The pricing of Yell shares at 285p gives the total group a market capitalisation of about �2bn ($3.2bn), making it large enough to enter the FTSE 100 list of top companies.

The flotation, which was cancelled last summer because of poor market conditions, is the largest so far this year and is seen by some analysts as a sign of renewed confidence in the stock market.

Official trading in Yell's shares is due to start on 15 July, which is when private investors will be able to buy the shares.

Strong response

"We are delighted with the way new investors have embraced the Yell story," said chief executive John Condron.

YELL GROUP Publishes Yellow Pages and Business Pages UK telephone directories Operates Yell.com, the online directory service Operates Yellow Pages 118 247, a telephone directory service (formerly called Talking Pages) Publishes Yellow Book directories in the US Had a turnover of �1.1bn in 2002/03 Employs 7,800 people (3400 in UK)

"The strong response to the Yell share offer reflects the quality and potential of the business."

The telephone directories business was bought by private equity firms Apax and Hicks, Muse, Tate & Furst from BT Group in 2001.

They will continue to hold 30% of the listed company with Yell management and staff holding 5%.

Appetite returns

Yell is the biggest firm to come to market since insurance group Friends Provident floated in 2001.

Neil Austin, head of new issues at KPMG Corporate Finance, said the float was an encouraging sign that the market could be about to pick up.

"I think it does signal that the appetite's come back," Mr Austin told BBC Radio Five Live.

"We've had twelve months of complete silence with institutions sitting on their hands - this shows there is some appetite there."