Infosys Technologies, a leading India-based IT firm, reported a first-ever drop in quarterly profit on salary hikes and a firmer rupee, but raised its full-year forecast, underscoring a recovery in demand for outsourcing.

India's second-biggest software services exporter, a trendsetter for the industry, expects information technology budgets to be flat in 2010 but is optimistic that outsourcing will gain from a global economic recovery, chief executive S Gopalakrishnan said in a statement.

The firm, which counts Goldman Sachs, BT Group and BP among its clients, expects earnings per share to rise 0.4 per cent for the full year, compared with its previous forecast for a 6.7-7.1 per cent drop.

A global recovery, recent orders and stable prices have boosted the outlook for Infosys and bigger rival Tata Consultancy Services after the world recession hit the sector last year. TCS is due to announce its quarterly results on Friday.

The country's $60 billion outsourcing sector, which manages complex computer networks and maintains technology operations for global firms, has re-started hiring after the downturn and is raising salaries.

Kicking off the sector's results, Nasdaq-listed Infosys holds a news conference on Tuesday at its global training centre in Mysore, about 170 km from its Bangalore headquarters.

The 337-acre campus boasts an 8-lane bowling alley, cricket ground, tennis courts and running track, highlighting the perks offered by big Indian tech firms to retain young jobseekers in a fiercely competitive market where job-hopping is the norm.

But the rupee, which rose 3.4 per cent in October-December, the higher salaries and tough competition from firms such as IBM and Accenture are key risks for the sector that earns more than half its revenue from the United States.

Infosys shares, valued at $32 billion after more than doubling in 2009, rose as much as 3.4 percent after the results in a broader Mumbai market that was little changed.

Infosys said its revenue in dollars for the year to March 2010 would rise 1.8-2.0 per cent to $4.75 billion to $4.76 billion, reversing its October forecast for a drop of 1.0-1.3 per cent.

The company, which develops applications, designs supply chains and offers backoffice services, said October-December net profit fell 3.6 per cent to INR15.82 billion ($351 million) under the India accounting standard, from 16.41 billion a year ago.

A Reuters poll had estimated a profit of INR14.79 billion.

Revenue fell an annual 0.8 per cent to INR57.41 billion, even as it added 32 new clients in the quarter.

Under the international accounting standard, net profit fell 4.9 per cent to 15.6 billion rupees.

The shares rose 13 per cent last quarter, matching gains in the sector index and outperforming a 2 per cent rise in the broader market. – Reuters