TORONTO (Reuters) - The Toronto Stock Exchange's main index gained on Thursday afternoon, recovering some of the losses from Wednesday's mass income trust selloff, as investors snapped up shares of dividend-paying financial services institutions.

The S&P/TSX composite index <.GSPTSE> was up 90.62 points, or 0.8 percent, at 12,141.01. Overall, six of the TSX index's 10 main groups were up, led by financials, ahead 2.4 percent.

Financials, led by Manulife Financial Corp. , picked up the pieces after Ottawa's decision to begin taxing the fast-growing income trust sector resulted in a TSX meltdown of nearly 300 points on Wednesday.

Manulife climbed C$1.43, or 3.9 percent, to a life high of C$38.17 as the insurer reported a record net income and raised its quarterly dividend 14 percent.

"It appears that the money that left the income trust sector yesterday is being directed to the financial sector," said Carlos Leitao, chief economist at Laurentian Bank Securities.

Banks are seen as an alternative to income trusts because of the hefty dividends they pay to shareholders, Leitao said.

Royal Bank of Canada was up C$1.22, or 2.4 percent, at C$51.62, while Toronto-Dominion Bank added C$1.69, or 2.6 percent, to C$67.18.

($1=$1.13 Canadian)

(Additional reporting by Blaise Robinson)

_______________________________________________________________

© Reuters Limited. All Rights Reserved.
Reproduction or redistribution of Reuters content, including framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.