OTTAWA (Reuters) - Safe-haven investments are suddenly sexy as shell-shocked investors look for protection from market turmoil, but a handful of stocks may actually benefit from the turbulence, strategists say.

While a dramatic US plan to tackle toxic debt and curb short-selling lifted spirits and markets Friday, nerves remain rattled after the Toronto Stock Exchange's main index dipped briefly into bear market territory this week.

"You're not alone if your head is spinning from the multitude of market hurricanes that suddenly whipped up and died this week," said KCM Wealth Management portfolio manager Adrian Mastracci.

"These are now extraordinary times. The market volatility is unprecedented. Investors are totally confused."

The S&P/TSX composite index has been on a stomach-churning roller-coaster ride over the past two weeks, with daily declines as big as four percent. The index gained a whopping 848 points, or seven percent, on Friday to close at 12,912.99.

A rush from risk during this period of turbulence has restored luster to a range of defensive sectors such as life sciences and grocers, as well as gold producers and a handful of dividend-paying companies.

Market instability has also helped those Canadian banks, insurers and hedge funds that made smart bets against the toxic debt that has plagued US financial institutions, said Duncan Stewart, president of Duncan Stewart Asset Management.

"There's two ways of winning a 100-metre race. One is to run really fast. The other is to have your opponent stumble," he said.

Shares in Canadian insurer Fairfax Financial Holdings, for example, jumped 17 percent this week after analysts said it could be on the verge of another big pay-day from its credit default swaps.

In the first six months of 2008, Fairfax reported a profit of $659.4 million, up from $279 million in the year-earlier period.

That partly reflected gains from credit default swaps, contracts that shift default risk between two investors, or allow investors to bet on the direction of credit markets.

Canadian banks could also stand to benefit from the credit crisis, Mr. Stewart said. They have generally steered clear of the hefty writedowns hobbling other global players and that leaves them in a good position to benefit from a less competitive US market and distressed asset sales.

"Anybody who isn't exposed to this benefits from a competitive perspective," he said.

In times of market turmoil, reliable bets remain the steady-as-she-goes sectors, advisers say.

Dundee Securities portfolio strategist and quantitative analyst Martin Roberge likes shares of Canada's big grocers: Loblaw, Empire and Metro . Sector conditions are improving, he said, and food retailers are relatively inexpensive compared with other defensive stocks.

"What we're facing is basically a liquidation process, so there are very few places to hide," he said.

Diversification is the key in the current environment, said Kate Warne, Canadian market strategist at Edward Jones.

Ms Warne recommends people put their money in stable dividend-paying companies whose operations are not affected by market turmoil, Yellow Pages Income Fund and Manitoba Telecom, for instance.

Consumer goods stocks are also attractive, but investors may want to look to the US for a broader choice, Warne said, giving Procter & Gamble and PepsiCo Inc as examples of companies with international exposure.

"People continue to brush their teeth, wash their face in the morning, drink their Pepsi - life goes on regardless of what's happening in the financial markets," she said.

Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier, said that outside gold, there is a short list of winners. "Who benefits?...Mattress savers who put money under the mattress. We always laugh at these people - maybe they're laughing at us now."