Hi
When you change the size of the first letter of a paragraph this will naturally cause the second and subsequent lines to move down to accommodate the size of the first letter of the paragraph. See solution below:

1. Type your paragraph as you normally would.
2. Select the first letter of the paragraph.
3. Choose Drop Cap from the Format menu. Word displays the Drop Cap dialog box.
4. Chose the position for your drop cap, according to your preference.
5. Change any other options to format your drop cap.
6. Click on OK.