(Adds portfolio manager comment, updates prices)
By Alastair Sharp
TORONTO, Dec 22 (Reuters) - Canada's main stock index edged lower on Monday as energy companies took cues from oil's return to price slips, offset by gains in some of the country's biggest banks.
Oil and gas stocks have fallen sharply in recent weeks, but most ticked higher last week after one among them, Talisman Energy Inc, was acquired by oil major Repsol.
"I think the energy stocks are higher than where they probably should be," Norman Levine, managing director at Portfolio Management Corp. "Last week as soon as the bid for Talisman was announced, they all jumped up as though they were all going to get taken over."
Crude fell on Monday as Saudi Arabia made clear it would not limit its production in order to prod prices higher.
Canadian Natural Resources was off 1.8 percent at C$35.96 and Encana Corp fell 4.1 percent to C$15.73.
The Toronto Stock Exchange's S&P/TSX composite index was down 18.49 points, or 0.13 percent, at 14,449.77.
Bank of Nova Scotia added 0.8 percent to C$65.63 and Toronto-Dominion Bank rose 0.7 percent to C$54.40.
Levine said life insurance companies, with more foreign exposure, will likely do better than banks in a rising rate environment, while telecom stocks could also win favor as investors turn more defensive after the oil price rout.
"The Canadian economy will not be as strong as the U.S. economy, and not as strong as it was going to be before because of the hit to commodities," he said.
Additional reporting by Allison Martell; Editing by Chizu Nomiyama and W Simon