Commodity Online: Is the growth momentum sustainable in the Indian economy? The second quarter results are out for the companies and once again the industry has shown a see-saw like movement, on one hand auto and ancillary industry showing robust income on increased sales, while key industries including mining and metals have faced a dent in their profits on lower sales realization.

Auto companies have performed well in the past quarter as the sales figures were impressive for the companies. India’s largest small car maker, Maruti Suzuki (India) Ltd (BOM: 532500) posted mammoth jump in the profits by 93% at Rs.570 crore for the Q2 FY10 against Rs.296.12 crore for the corresponding period last year. Sales rose by 47% at Rs.7049 crore against Rs.4806.26 crore.

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High demand driven by new models launched gave a sharp rise in company’s sales during the said quarter. However, company’s stock movement on the Bombay Stock Exchange was more of a rollercoaster ride, as the stock price witnessed appreciation during the mid-period of the quarter but lost the steam at the fag end of the quarter. The stock price stood at Rs.1403 on Friday, marginally down by 0.7% from its level three months back.

Similarly, Tata Motors’ (BOM: 500570) Q2 profits galloped by 110% to Rs.729 crore on a revenue base of Rs.7979 crore for the second quarter. Nearly doubling of the profits was mainly attributed to a marked decline in raw material costs and strong demand for its Ace trucks and Indica Vista cars, beating street estimates.

Company stocks witnessed a sustained rise over past three months as the stock price gained by over 34% during the period. Tata Motors closed at Rs.565 on Friday on the BSE.

Utility vehicles maker, Mahindra & Mahindra Ltd (BOM: 500520) posted net profits of Rs.702.9 crore as against Rs.205.7 crore for the second quarter of the current fiscal, showing a huge rise of 242% over the corresponding period in last year. The remarkable rise in the company’s profits was mainly driven by the strong sales performance in automotive as well as farm equipment sector. The company’s stock price yielded moderate returns of over 7% over past three months, from Rs.856.80 to the recent level of Rs.921.95.

However, the upbeat mood in automobile sector was not visible in the downstream industries like mining and metal production. Metals sector was seen plunging down in the second quarter with weak income figures owing to reduced realization.

Metal producers including Tata Steel Ltd, Sterlite Industries Ltd, Hindalco Industries Ltd and state owned Steel Authority of India Ltd (SAIL) have witnessed heavy erosion in profits in the past one quarter.

Tata Steel’s standalone net profit, which excludes earnings from the European unit Corus, dropped 49% to Rs.903 crore in the quarter ended 30 September from Rs.1,788 crore in the year-ago period. Revenue declined 16% to Rs.5,692 crore for the period.

Sterlite Industries, the Vedanta Group company, reported a 27.9% decline in the company’s net profits at Rs.1240.33 crore for the Q2 FY10. Company’s total income declined to Rs.6129.06 crore during the second quarter from Rs.6810.99 crore a year back. The decline in the company’s profits was mainly attributed to the low sales realization.

Public sector steel major, SAIL also witnessed a dip in the Q2 profits at Rs.1663.49 crore over Rs.2009.60 crore for the corresponding period last year, down by 17%. The fall was attributed to the lower sales realization and the merger of Bharat Refractories Ltd (BRL) with it.

The weakness in the key sectors has become a concern for the administration. However, there is an optimistic hope for the third quarter on the back of improved demand from infrastructure sector and improvement in metal prices in the international market.

The finance minister, Pranab Mukherjee had described the recovery process as slow and halting. The Indian government had taken a number of stimulus measures, including cut in excise duty and service tax, to combat the economic slowdown. The Indian economy grew 6.1% in the first quarter of 2009-10.

Though the industrial production recovered in June-August, exports continued to fall. The finance minister said he was hopeful of growth in the Indian economy reviving to 9% in two years. The growth in the Indian economy slowed down to 6.7% in 2008-09 due to the global financial crisis compared with average 9.4% growth in the previous three years.

The finance minister said he expected growth in the Indian economy to pick up in the second half of the current financial year. Overall, the economy is likely to grow 6.0-6.5% in the current financial year ending March, he said.

The headline inflation is also likely to touch 6.0-6.5% by March, he said. The Reserve Bank ofIndia has projected the inflation rate based on Wholesale Price Index to be 6.5% with an upward bias by March-end from the current 1.51%.