With large deals back on the table, strong client additions, improved deal conversion rates and volume growth picking up momentum, the message at the end of the April-June, quarter is clear?the Indian information technology (IT) sector is back on track.

With recovery in the global economy, enterprises are thawing IT budgets to prepare for the future, which has led to renewed demand for the Indian IT sector. According to various brokerage and research reports, the front-line Indian IT companies are expected to post strong revenue growth for the April-June period.

The demand is driven mainly by the companies? increased focus on offshoring on account of growing cost consciousness, higher spending to implement stricter regulatory compliance and opportunities arising from merger and acquisition (M&A) integration, says a research note from Sharekhan.

The April-June quarter also saw a healthy surge in deal conversions, which resulted in a slew of contracts and tie-ups across verticals. The new deals range from software development, infrastructure, engineering services and policy-administration contracts. Leading IT vendors such as Infosys, TCS, HCL and Patni have reported a number of significant wins.

For the top tier Indian IT services firms, the growth during the Q1 of FY11 is broad-based across verticals and geographies and mainly driven by buoyancy in the US and emerging markets. ?For Q1 FY11, we expect the top four IT companies to report 3-5% quarter-on-quarter revenue growth in US dollar terms, mainly driven by volume growth,? says Vaibhav Agrawal, vice-president (research), Angel Broking.

According to a research note from ICICI Securities, in the Q1 FY11 results, large-caps are likely to reflect good balance between revenue growth and profitability, with mid-caps continuing to struggle with margin issues such as wage inflation, cross currency impact and rising attrition.

Among the top-tier Indian IT firms, Infosys Technologies will be the first to post its first quarter results on July 13. The company is expected to post the best Q1 FY11 results among the top tier IT firms with US dollar revenue growth of 5.3% qoq, ahead of its guided range of 2.6-3.4%, says a research note from Motilal Oswal.

TCS and Wipro are expected to follow with growth of 4.7% qoq and 3.7% qoq respectively. Growth is expected to be broad-based, led by banking, financial services and insurance (BFSI), with improved traction in manufacturing/discretionary service lines, it noted.

In the sector, Infosys is better poised than peers to weather some of the rising risks from Europe, cross-currency impact and any sharp rupee appreciation, says ICICI Securities. Despite the debt crisis in Europe, the brokerage firms do not see a major impact on the Indian IT sector. For the IT companies, exposure to Portugal, Italy, Ireland, Greece and Spain is just about 0.5% of their revenue while major chunk comes from the UK, Germany, France and Switzerland, says the Sharekhan note.

However, brokerage firms predict that the US dollar-term revenue of the IT companies will be hit by unfavourable cross currency movements due to the appreciation of the Euro and other European currencies against the US dollar.

?Revenue growth in rupee terms is expected to be about 200 basis points lower than dollar revenue for top-tier companies due to the impact of rupee appreciation during the quarter,? says Agrawal. On account of wage hike and volatility in currency movements, the IT companies are expected to experience a 50-100 basis-point sequential decline in their operating profit margin in Q1 FY11 results. The higher income tax rates coupled with margin pressure is expected to negatively impact their bottom line.