CANADA STOCKS-Bay St rallies in biggest gain in 7 months

* TSX up 230.66 points, or 1.75 percent, to 13,381.59

* Nine out of the TSX’s 10 main groups up (Updates to close, adds quote, byline)

TORONTO/OTTAWA, Aug 26 (Reuters) - Canada’s main stock index racked up its biggest increase in seven months on Wednesday in another volatile session as investors dove back into shares that had recently sold off.

The TSX, which is heavily weighted with energy stocks, has been hit by the slide in crude prices and was caught up in the global market rout earlier this week that was fueled by concerns about China.

Despite faltering during the day, Toronto stocks were able to rally in the final hours of trading, helped by a nearly 4 percent surge in stocks on Wall Street.

The utilities sector, typically seen as a safe haven, fared the best, rising 3.4 percent, while tech shares jumped 2.9 percent.

“The sentiment seems to be changing hour to hour,” said Bryden Teich, associate portfolio manager at Avenue Investment Management, in Toronto. “The moves that we saw early in the week were pretty violent.”

“A lot of those more long-term defensive names that snapped down early in the week, you’re seeing bounce back up today, that’s what’s helping push the market up,” Teich said.

The Toronto Stock Exchange’s S&P/TSX composite index closed up 230.66 points, or 1.75 percent, to 13,381.59. It was the biggest percentage gain since late January.

Financial shares also contributed to gains despite a drop in Royal Bank of Canada after quarterly earnings that showed a sharp spike in bad loans to the energy sector. RBC was among the biggest drags on the index, down 0.4 percent to C$72.1.

But Bank of Montreal rose 4.8 percent to C$71.05 the day after its earnings topped estimates. The sector as a whole climbed 2.4 percent.

The materials sector was the only main group to decline as gold producers dropped alongside the price of gold. Goldcorp Inc fell 5.3 percent to C$17.46, while Barrick Gold Corp declined 7.1 percent to C$8.72.

Although the end of the summer can exacerbate moves because there is lower volume in the market, September will bring some potentially important events, including interest rate decisions from the Bank of Canada and the U.S. Federal Reserve, Teich said.

“We’re near-term in this little window of bouncing up and down until things stabilize,” he said, though any uncertainty around those factors will add to volatility. (Editing by Leslie Adler)