MUMBAI, Jan 17 (Reuters) - India's benchmark 10-year bonds and the rupee rose on Thursday after the country's oil minister said the government would allow oil marketing companies to set diesel prices, in what markets interpreted as a partial deregulation of prices.
The 10-year yield fell 3 basis points to 7.85 percent from levels before Oil Minister Veerappa Moily's comments.
The rupee rose as much as 54.49 to the dollar from around 54.63/64 previously.
In stock markets, Hindustan Petroleum Corp surged 6.2 percent while Oil and Natural Gas Corp gained 4.5 percent. (Reporting by Subhadip Sircar & Swati Bhat; Editing by Rafael Nam)