"The results have been very strong," said Yeshwant Kini, analyst at SG Asia Securities (India). Many analysts had predicted that the firms would report reduced earnings growth.

"There were a lot of fears of a slowdown in this quarter due to reduced spending on software services before the Year 2000 changeover, but it has been a very strong quarter," Kini said. The sector was likely to witness a rise in mergers and acquisitions as well as international listings as firms build size to meet demand, they said.

Many Indian software firms have benefited from the boom in global demand for services, especially fixing the millennium bug problem in computer systems of international firms.

They have consistently posted average quarterly profit growth of 50 to 60 per cent year-on-year and have turned investor favourites on the stock markets.

A Reuters compilation of 27 leading software firms that announced financial results for the three months ended December 31, 1999 showed an average profit growth of 83.95 per cent compared to the same quarter a year ago, beating analysts' expectations of 60 per cent growth.

The results have led their shares to bounce back from a sharp fall in early January bought on by a drop in technology shares on the US Nasdaq market."The fact the companies have managed such strong earnings growth shows they have made the transition smoothly from Y2K revenues to other revenues," said SG Asia's Kini.

"Individually, Satyam Computer and Wipro performed better than I expected them to," he said. Satyam Computer Services reported an 83 per cent rise in net profit to Rs 36.18 crore ($8.3 million) for the quarter compared to Rs 19.81 crore in the year-ago period.

Wipro posted a net profit of Rs 84 crore for the quarter against Rs 26.7 crore in the year-ago quarter, a 215 per cent rise.