Sensex retreats from near 2-month high; Infosys cuts forecast

MUMBAI (Reuters) - India's stock markets turned flat after hitting their highest in nearly two months as software stocks declined, led by Infosys as it reduced its full-year U.S. dollar revenue growth guidance, while worries retail inflation for September could edge higher also weighed on the market.

Infosys, India's second-largest software services exporter by revenue, on Monday cut its fiscal year 2016 revenue forecast saying broad weakness in IT spending and a stronger dollar were making clients wary, sending its shares sliding as much as 5 percent.

India will release September retail inflation and August industrial output data later in the day. The inflation rate is likely to pick, driven by higher food prices, but will remain comfortably below the central bank's target and allow room for further policy easing, a Reuters poll showed.

"There has been Infosys-led falls but Infosys earnings cannot be extrapolated to the entire earnings season," said Aneesh Srivastava, ?chief investment officer at IDBI Federal Life Insurance Co.

The 30-share BSE Sensex was trading 0.03 percent higher while the 50-share Nifty was up 0.04 percent after earlier marking their highest level since Aug. 21.

Technology stocks led the declines. Infosys fell 1.9 percent while Tata Consultancy Services lost 1 percent.

Among gainers, metal stocks soared for a second day after commodities group Glencore said it would cut its zinc output by a third, sparking a short-covering rally across the board.

Vedanta surged 10 percent while Hindalco Industries rose 9 percent.

(Reporting by Abhishek Vishnoi in Mumbai; Editing by Gopakumar Warrier)