MUMBAI: BSE Sensex rose to a record closing high as metal stocks such as Tata Steel, Sesa Sterlite surged after surveys showed China's factory and services sectors had their best performance in months, while the RBI Governor Raghuram Rajan held key rates steady and toned down inflation rhetoric.

China's factory sector turned in its best performance in four months in May as export orders improved although activity still contracted, a private survey showed, adding to signs the economy may be stabilising.

Sentiment was also supported after the Reserve Bank of India eased rules to spur bank lending and toned down its inflation rhetoric in moves set to be welcomed by a new pro-business government determined to revive economic growth.

"I am hopeful that we may see a rate cut soon provided the government's administrative actions finally succeed in reducing food inflation," said Motilal Oswal, chairman and managing director at Motilal Oswal Financial Services. The benchmark BSE index rose 0.7 percent to a record closing high of 24,858.59, surpassing its previous milestone set on May 26.

The broader NSE index gained 0.7 percent a record closing high of 7,415.85, surpassing its previous record hit on May 23. Steel shares gained after surveys showed China's factory and services sectors had their best showings in months in May. Tata Steel rose 6.9 percent, Steel Authority of India gained 4.3 percent, and JSW Steel rose 4 percent.