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After yanking more than $890 million out of beat-up utility funds during the three months ending July 27, small investors have begun plowing cash back into such funds to take advantage of the sector's recent recovery, according to data gathered for Money magazine's Small Investor Index.

Preliminary reports from AMG Data Services in Arcata, Calif., show that during the first three weeks of August investors seeking steady income and a shot at capital gains have stashed more than $115 million into funds that hold the high-yielding shares of telephone, gas, water and electric companies. The lure: an upswing in utilities' share prices. The Dow Jones utility average, which had fallen as much as 23 percent this year, has since rebounded a robust 8 percent from its 12-month low in June.Although utilities are generally shunned when interest rates move up, many analysts believe utility stocks and funds will continue to rise, despite the Federal Reserve Board's one-half percentage point hike in the federal funds rate last Tuesday. "Utilities are very attractive now," said Michael Metz, chief investment strategist at Oppenheimer & Co. "The whole group has tanked, leaving a lot of opportunities."

Those intrepid investors who have led the way back into utility funds are already reaping rewards. Shareholders in $2.7 billion Franklin Utilities have enjoyed 1.5 percent gains this month alone, while investors in $1.2 billion Fidelity Utilities Income have earned 1.3 percent.

Last week, the Money Index, which tracks the typical investor's holdings, rose $286 to $46,116. Stocks gained $229, and bonds gained $42. CDs and money-market funds chipped in $10.