* FTSE up 0.2 percent
* Banks down on capital requirement and Europe worries
* Defensives gain on investor uncertainty
By Simon Falush
LONDON, Jan 21 (Reuters) - Strength from defensive stocks pushed Britain's top shares higher by midsession on Monday, but losses from banks on worries about capital constraints kept gains muted.
Tobacco stock British American Tobacco and drugmaker AstraZeneca were among the biggest supports to the index as investors, uncertain on the outlook for the domestic and global economy, sought companies thought to be resilient.
By 1214 GMT, the FTSE 100 index was up 9.16 points, or 0.2 percent, at 5,905.41, having risen 0.5 percent on Friday.
Banks were the biggest fallers on fears they could face greater balance sheet strains under proposals from a government-backed commission to make their retail arms safer..
The cyclical sector was also under pressure as investors were still wary about taking positions in more growth reliant stocks.
"There's uncertainty about what the final outcome will be on banking regulations and there's going to be months and months of speculation," said Phil Dobbins, financials analyst at Shore Capital.
"But I also think they are being hit as a risk trade, as people sell them whenever there's concern on the wider economy."
Royal Bank of Scotland, which rose 6.5 percent on Friday on reports the part-nationalised bank could leave the government's asset protection scheme early, fell 3 percent.
The sector was also knocked by instability in the euro zone after Ireland's junior coalition party withdrew from Prime Minister Brian Cowen's government.
Elsewhere engineer Invensys shed 2.9 percent as Goldman Sachs cuts its rating to "neutral" from "buy" in a review of European capital goods companies.
Chip designer Arm Holdings fell 1.2 percent, with traders citing comment from Barron's, an influential American financial magazine, which poured cold water on recent bid talk.
HOTELS, GROCERY SUPPORT
Back among gainers, Whitbread gained 1.7 percent after the hotel group was upgraded to a "buy" by Citigroup, which sees it trading cheaply after cost cutting and an increase in room numbers.
Online grocer Ocado was the star midcap gainer, jumping 7.2 percent, with traders citing reheated bid talk, a U.S. investor upping its stake and investors closing short positions.
Mining and energy stocks fell amid concerns over Chinese inflation and fears of further interest rate rises from the world's biggest consumer of raw materials, still lingering. Antofagasta was down 1.1 percent.
Analysts at JP Morgan, however, urged investors remain upbeat on cyclical stocks in a strategy note.
"We advise not to abandon the group and see potential further 50 percent upside from here," the broker said.
No key British or U.S. data were due on Monday.
Technical indicators indicated that there could be further short term pressure for the index.
"The long-term chart is indicating further downside pressure is likely with 5,804.84 to 5,737.43 the likely target," James Hyerczyk, Analyst at Autochartist, said. (Additional reporting by David Brett; Editing by Jon Loades-Carter)