TORONTO (Reuters) - Toronto's main stock index rose yesterday, struggling up from a 1.7 percent drop earlier in the day, boosted partly by strength in the resource-laden materials sector.

The rally came in the last half hour of the trading day. Analysts said it was spurred by news that the Obama administration was working on a programme to subsidise mortgage payments for troubled US homeowners.

"The late surge in the TSX is directly attributable to the late surge in US stocks," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.

"The housing situation in the US is at the epicentre of this mess, so any direct relief would be positive for the markets."

The S&P/TSX composite index closed up 40.89 points, or 0.47 percent, at 8,778.78, with seven of its ten main groups higher.

The materials sector rose 1.3 percent, helped higher by rising gold prices, while the telecom sector also provided support, up 2.6 percent.

Among heavily weighted stocks on the upside were Research In Motion, up 5.1 percent at C$63.05, and Telus Corp , up 4.6 percent at C$35.04. Barrick Gold rose 1.3 percent to C$48.53.

The index dropped as low as 1.7 percent at one point and was stuck in negative territory for most of the day.

Financials trimmed losses but still ended down 0.8 percent, while the energy sector was down 0.2 percent.

Major issues on the downside included Manulife Financial , off 6 percent at C$18.20. However, Sun Life Financial ended the day up 0.7 percent at C$23.15.

The two big insurers saw their quarterly results battered by ailing markets, write-downs and the need to shore up reserves.

In the oil patch, Nexen Inc dropped 2.7 percent to C$16.97. Canada's No. 4 independent oil explorer posted a quarterly loss, pushed down by the plunging price of crude oil and high drilling costs at some properties.

On the upside, Shoppers Drug Mart reported a jump in quarterly profit, helped by strong pharmacy and front-of-store sales. The company said it saw sales rising through 2009, despite the slowing economy. Shoppers stock gained 3.5 percent to finish at C$43.00.