* Benchmark 10-year bond yld falls the most in over 2 wks
* RBI says “need for viligance” on inflation
* But Gov Patel balances comments on price and growth risk
* Rupee, stocks weaken on muted foreign inflows (Updates to write through, add quote, market levels)
By Suvashree Choudhury and Nidhi Verma
MUMBAI, Feb 7 (Reuters) - Indian bonds gained the most in over two weeks on Wednesday after the central bank sounded less hawkish on inflation concerns than some traders had expected.
Traders took comfort from the tone of the Reserve Bank of India’s statement after a monetary policy review, and by comments from Governor Urjit Patel who appeared to carefully balance the risks to inflation and growth.
“This seems more like a relief rally,” said Anand Bagri, head of domestic markets at RBL Bank in Mumbai.
“Markets were overly bearish going into the monetary policy. The policy (statement) seems to have assuaged some of these concerns which has led to short covering,” he said adding that traders might turn cautious on bond supply concerns.
The 10-year benchmark bond yield fell as much as 11 basis points at one point to 7.49 percent, the biggest intraday fall since Jan. 17.
It was trading at 7.51 percent at 1049 GMT, after ending at 7.57 percent on Tuesday.
The rupee also rose briefly but trimmed gains on weak foreign inflows.
It traded at 64.24 rupees to the dollar from 64.13 before the policy announcement. It had ended at 64.25 on Tuesday.
The broader NSE stock index was down 0.21 percent.
The RBI kept the repo rate steady at 6.00 percent, as widely expected, but maintained a careful balancing act in its comments.
The central bank highlighted higher oil prices and fiscal deficit slippages as potential risks to inflation on one hand, but also echoed concerns of government and businesses over weak economic growth. (Editing by Kim Coghill)