* TSX down 13.29 points, or 0.11 percent, at 12,402.36 * Six of the index's 10 main groups lower * Progress falls 11.5 percent to C$19.16 * Nexen down 6 percent to C$23.65 By Solarina Ho TORONTO, Oct 22 (Reuters) - Canada's main stock dropped on Monday, as Canada's rejection of a foreign bid for Progress Energy Resources Corp rippled through the energy stocks and tempered gains in mining stock. Oil and gas shares, which make up about 25 percent of the index, dominated the decliners after the government blocked Malaysian state oil firm Petronas' C$5.17 billion bid for Progress. Progress, which was also hit by a number of price target cuts after the decision, tumbled 11.5 percent to C$19.16. "It means the government meddling and restriction of free markets. It's just not positive in general for the markets," said Levente Mady, vice president and senior portfolio manager at PI Financial Corp. The rejection of the Progress Energy deal has implications not just for the energy sector, but for the broader market as well, he added. The surprise move blocking the Progress Energy deal could signal problems for the much larger C$15.1 billion Chinese offer for oil producer Nexen Inc, which was the most influential decliner on the index. Nexen slumped 6 percent to C$23.65. "The Nexen deal is a different cup of tea. But if I were one of the Nexen shareholders, I'd be a bit more nervous this morning than I was last week," Mady said. Encana Corp gave back 2.99 percent to C$23.07, while Talisman Energy dropped 2.15 percent to C$12.76. At mid morning, the Toronto Stock Exchange's S&P/TSX composite index was off 13.29 points, or 0.11 percent, at 12,402.36. Six of the index's 10 main groups retreated. "It's a continuous struggle between specific individual disappointments like the Progress deal being blocked and the underlying economic outlooks for couple of the largest economies of the world that appear to be improving," said Gavin Graham, president of Graham investment strategy, referring to China and the United States. Gold miners tracked pricier bullion, which rebounded following its biggest one-day drop in more than three months on Friday. The precious metal miners pushed the overall materials group up 1.14 percent, with Barrick Gold leading the index higher, rising 1.40 percent to C$39.09. Goldcorp gained 0.79 percent to C$43.39. Agrium Inc shares were the second most influential gainer, rising 2.32 percent, to $106.36 after the Canadian fertilizer maker and agricultural goods retailer said on Monday its board plans to double its annual dividend payout.