Mahindra & Mahindra Ltd reported a 2.4 per cent drop in its second-quarter net profit on Friday after sales fell, but the automaker said it expects an economic recovery to boost demand for the rest of the year.

Mahindra said in a statement its net profit for the three months ending September 30 was Rs 924 crore ($140.5 million), down from Rs 947 crore a year earlier.

Analysts had expected Mahindra to report a Rs 901 crore profit, according to Thomson Reuters data.

"With investment sentiment picking up and tail winds from falling interest rates likely to bolster urban consumption demand further, we expect growth to step up pace in the second half of the current fiscal year," Mahindra said in the statement.