The paper discusses the problem of state estimation for the induction motor (IM) drive and presents a Sliding Mode (SM) observer that is developed based on the IM model in the stationary reference frame. The observer is realized using only the measured motor voltages and currents and can be used to provide field orientation in a sensorless IM drive scheme. The observer estimates the stationary reference frame fluxes of the IM and is developed using switching (sliding mode) terms based on the current mismatches. The novelty is that the method uses an arbitrary speed signal to implement the observer rather than the real motor speed. The paper discusses the design of the feedback gains of the observer and shows the flux estimates obtained when the arbitrary speed signal is used. Convergence of the proposed estimator is analyzed using Lyapunov nonlinear stability methods. The theoretical development is supported by simulation results.