* TSX falls 7.18 points, or 0.06 percent, to 12,650.91 * Seven of 10 main sectors decline * National Bank up 1.4 percent after results * Manitoba Telecom climbs after deal to sell Allstream * Niko jumps 23 percent after discovery off India's coast By John Tilak TORONTO, May 24 (Reuters) - Canada's main stock index fell modestly on Friday as fears that the U.S. Federal Reserve will turn off the tap on its stimulus program offset a rise in National Bank of Canada and some other financial stocks. National Bank climbed 1.4 percent after the lender reported a stronger-than-expected profit, and its share price recorded the biggest gain of the country's six biggest banks. Royal Bank of Canada, the country's biggest bank, advanced 0.6 percent to C$63.53. Data showing positive economic sentiment in Germany and a rise in shares of gold producers helped curb negative sentiment. Investors have been rattled by hints from U.S. Fed Chairman Ben Bernanke that the central bank might slow its massive growth-stimulating bond purchases. "The monetary easing in the United States is not going to go on forever," said Fred Ketchen, director of equity trading at ScotiaMcLeod. "One of these days they're going to pull back on that," said. "So far they haven't got to that point." The Toronto Stock Exchange's S&P/TSX composite index was down 7.18 points, or 0.06 percent, at 12,650.91. Seven of the 10 main sectors on the index were in the red. Energy shares fell 0.2 percent, tracking a drop in the price of oil. Shares of Niko Resources rose 23 percent to C$7.38. The company, along with partners Reliance Industries Ltd and BP, announced a significant gas condensate discovery off India's east coast. The materials sector, which includes mining stocks, was little changed as gold producers climbed. Barrick Gold Corp gained 1.4 percent to C$20.40, and Goldcorp Inc added 1.1 percent to C$28.37. Financials, the index's most heavily weighted sector, were up slightly. National Bank of Canada reported a 6 percent increase in its quarterly operating profit, while also outlining plans to buy back shares and raise its quarterly dividend. The results follow Toronto-Dominion Bank's report on Thursday that its second-quarter profit rose. "That's continuing the parade we've seen of encouraging, modestly improving earnings from our financial institutions," Ketchen said. "To me, that's a good sign." In other company news, Manitoba Telecom Services Inc struck a deal to sell its Allstream business, a fiber optic network stretching across Canada, to Accelero Capital Holdings for C$520 million ($502.8 million), including debt assumed by the buyer. Shares of MTS were up 4.7 percent, at C$33.62.