Hero MotoCorp, the world's largest two-wheeled vehicle manufacturer, was hit by rising competition and slowing demand, knocking second quarter profit down 27 percent.

Motorcycle sales in India have been subdued by high interest rates and rising fuel costs, while Hero's dominant market share has been eroded by an aggressive push by former partner Honda Motor Co.

"Sensing the slowdown in the market, we led the way in adjusting our production plans in August and September, and this has been reflected in our quarterly sales figures," Pawan Munjal, managing director, said in a statement.

Hero's operating margin in the quarter stood at 13.86 percent, down from 15.76 percent in the same period a year previously and 15 percent in the previous quarter.

Shares in the automaker closed 1.8 percent lower on Tuesday ahead of the results, on a Mumbai market that fell 0.4 percent.

Since splitting from Honda Motor Co last year, Hero has juggled ramping up its exports, which were restricted under the 26-year joint venture, signing new technology tie-ups to boost its expertise, and fighting off the domestic threat to its market share posed by its former partner.

Hero's domestic two-wheeler sales fell 2.9 percent in the first six months of the fiscal year that began in April, against a 3.1 percent rise in overall industry sales, according to the Society of Indian Automobile Manufacturers.

Honda's sales rose 49 percent in the same period.

Hero said profit for the July-September period was 4.41 billion rupees, below the average market expectation of 4.87 billion rupees, according to Thomson Reuters I/B/E/S.

Net sales slumped by 11 percent to 51.15 billion rupees, below the average analyst estimate of 54.05 billion rupees.