(Updates with Saudi national's detention)

By Bappa Majumdar

NEW DELHI, Sept 28 (Reuters) - Indian police have detained about more than 10 people in connection with a deadly bomb blast in a crowded New Delhi market, officials said on Sunday, the second attack in the capital this month.

Police said they had witnesses who could identify the two men who dropped a plastic bag in the capital's busy Mehrauli market on Saturday, before speeding away on a motorcycle.

A boy picked up the bag and ran after the motorcyclists to return it when there was a huge explosion, killing him on the spot. A 60-year-old man died in hospital later. Twenty-two people were wounded in the blast.

"We are interrogating a lot of people for clues and should come up with some answers soon," Rajan Bhagat, the Delhi police spokesman said on Sunday.

In the neighbouring state of Haryana, police detained two people in connection with a threat about possible bomb blasts made to Delhi police last Friday.

Prime Minister Manmohan Singh condemned the attack.

"We won't give up the war on terror and we will fight with all resoluteness to deal with the menace," the Press Trust of India (PTI) quoted him as having said on board an aircraft, while going to France.

Saturday's explosion followed a blast in the capital on Sept. 13 that killed 23 people and wounded 100.

The Indian Mujahideen (IM) militant group, an offshoot of the banned Students' Islamic Movement of India, claimed responsibility for that blast.

A Saudi Arabian national was detained at New Delhi's airport after arriving from Jeddah on suspicion of funding IM's operation in India, PTI said in a report.

Delhi police declined to comment on his suspected links with the group.

Police said they were investigating possible links between Saturday's blast and the Indian Mujahideen group, which they say is connected to Pakistani militant group Lashkar-e-Taiba and Bangladesh's HUJI group.

They said illegal Bangladeshi migrants with the support of some militant groups like HUJI could also be behind the blast.

Investigators said ammonium nitrate, sulphur and potassium were possibly used with nails to cause the low-intensity blast on Saturday.

On Sept. 19, police shot dead two Muslims in a raid, and said one of them was the mastermind of the New Delhi bombings and chief of the Indian Mujahideen operations in the capital. (Additional reporting by Geetinder Garewal in Chandigarh; Editing by Alison Williams)

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