Sanjeev Sharma/TNS
New Delhi, June 6
A combination of factors, including arrival of the monsoon, hopes of further rate cuts by the RBI and firm global markets on the back of a possible monetary stimulus for Europe, powered the single biggest rally in the stock markets since January 3 this year.

After weeks of dull activity and grinding down, Sensex shot up by 434 points (up 2.7 per cent) to close at 16,454 points, while Nifty index was just below the 5,000-point mark.

The arrival of the monsoon added cheers to the improved sentiment in anticipation of the likely rate cuts by the RBI in its meeting scheduled to be held on June 18. Expectations of the government moving forward on infrastructure projects and reforms and a possible liquidity injection from the European Central Bank to ease the European crisis provided a boost to the markets.

Auto, banking, power, infrastructure and realty stocks witnessed a strong rally. Among stocks of automobile companies, Hero Honda gained 5 per cent to close at Rs 1,955 while Tata Motors, M&M, Bajaj Auto and Maruti gained 2-4% each. The BSE 200 advance decline ratio was at 7:1 and volumes rose on both exchanges after a long gap.

Shubham Agarwal, associate vice-president, Motilal Oswal Securities, said both Asian and European markets surged by 1-2 per cent. “Moreover, fall in crude oil prices, expectations that the government will initiate steps to drive growth in core sectors like infrastructure and power and hopes of the RBI cutting interest rates drove the markets higher,” he said.

Sanjeev Zarbade, vice-president, (private client group research), Kotak Securities, said hopes of rate cuts by the RBI fuelled rally in bank and auto stocks.