Infosys Technologies Ltd, India's No. 2 software services exporter, raised its annual revenue forecast after it topped market estimates with a 13 percent rise in quarterly profit on rising outsourcing demand.
Infosys, larger rival Tata Consultancy Services and No. 3 player Wipro, have raised salaries due to the growth of orders as companies increase technology spending.
Shares in Infosys rose 2 percent to an all-time high after the results but turned negative later.
However a strengthening rupee, wage hikes and rising competition from global players such as IBM and Accenture, are likely to put pressure on profit margins of Indian firms.
"The positives are the upward revision in full year guidance. After this, other IT companies are also expected to report in-line numbers." said K. K. Mital, head of portfolio management services at Globe Capital.
Infosys, which kicked off results for India's showpiece outsourcing industry, expects dollar revenue to rise 24 to 25 percent in 2010/11, up from a 19 to 21 percent forecast in July.
With this increase, Infosys, known for its conservative outlook, has raised its full-year dollar revenue guidance for the fourth quarter in a row.
"However, the continued global economic uncertainty, coupled with extreme currency volatility is a concern for the industry," Chief Financial Officer V. Balakrishnan said in a statement on Friday.
Nasdaq-listed Infosys said net profit for its second quarter ended Sept. 30 rose 13.2 percent to 17.37 billion rupees ($395 million). This compares with a Reuters poll of 17.17 billion rupees.
Bangalore-based Infosys, which counts Goldman Sachs, BT Group and BP among its main clients, added 27 clients during the quarter.
The company, set up by seven engineers in 1981 with an initial investment of $250, added 7,646 employees in the quarter.
Infosys shares, valued at over $41 billion are up over 22 percent this year, outpacing the broader market's 17.4 percent rise.
At 9.11 a.m., the stock was trading down 1.1 percent at 3,148.10 rupees in the main Mumbai market that was down 0.2 percent.