A core of large investors in BSkyB is planning to stick with it regardless of the outcome of a bid by Rupert Murdoch's News Corp to take it over -- now hanging in the balance -- and as others dumped the shares on Monday.

Three of five institutional shareholders, who together hold around 8 percent of the stock not owned by News Corp, told Reuters that BSkyB was a fundamentally strong firm, with two stating they might buy more shares.

The investors were speaking before the government said the bid was being referred to a full Competition Commission investigation.

British Prime Minister David Cameron also said on Monday News Corp should focus on clearing up the hacking allegations before pressing ahead with the bid for BSkyB.

The upbeat tone of investors was at odds with uncertainty over Murdoch's proposed multi-billion pound takeover which drove the shares higher in recent months, and flies in the face of selling which has gathered pace in the past week on concern the deal will fail.

The shares traded up to 7 percent lower on Monday, close to a 700 pence indicative offer made by News Corp last year and nearly 18 percent off the 850 pence hit on July 4.

Following recent falls and today's drop, the shares are starting to look attractive regardless of what happens to the NewsCorp bid, although the potential weight of selling from the risk arbs could take the shares lower still, one head of UK equities at a top 30 investor in BSkyB told Reuters on Monday.

News International, the British arm of News Corp's global media empire, closed its top-selling News of the World paper after allegations it paid investigators to hack into voicemail accounts of murder victims and war dead.

The phone-hacking scandal, which first surfaced in 2006, has collided with Murdoch's efforts to win approval from competition watchdogs to buy BSkyB. They are now almost certain to delay the deal, investors said.

A second UK fund manager with several million BSkyB shares told Reuters his investment house could be tempted to grow its stake at the expense of time-poor hedge funds which had little stomach for months of waiting for clarity on News Corp's plans.

The underlying strength of the business and the cash that it throws off, particularly since they have very little further systems investment to do, does make it look quite interesting from here, the manager said.

I think the company will at some point get taken out but, even if it doesn't, there's a great opportunity to return a lot of cash via special dividends or growing the ordinary dividend.

This continued belief in BSkyB's value echoes comments by the head of hedge fund Odey Asset Management, who said on Sunday it had bought some 3 million shares in the past week.

But one UK-based investment manager said his firm had run out of patience and started to significantly reduce its stake in BSkyB several days before the latest chapter in the hacking scandal, selling the vast majority of its shares.

We didn't think Murdoch would pay extra (on BSkyB's trading price), we didn't have a huge position and we'd come up with a better idea elsewhere.

We'd made some nice money in it and we thought we'd move on. We're now just watching from the sidelines being grateful for small mercies.

None of the investors contacted by Reuters said they had plans to meet with Murdoch or representatives of News Corp, who have arrived in the UK for crisis management talks with News International CEO Rebekah Brooks.

The lack of one-on-one reassurances on corporate governance or continued good relations with advertisers has failed to roil the majority of investors, however.

We intend to remain long-term shareholders of BSkyB. People are looking at other aspects of this which we're not involved with, said a fourth shareholder.

The share price has been affected but our view is that will right itself once we've moved through the media focus on it, because the long-term valuation on the stock hasn't changed.

A fifth investor, among BSkyB's top 10 shareholders by size, said it would reserve comment until it had reviewed the fast-moving events.

A sixth large shareholder with a passive holding through index tracking funds said it had no plans to engage with BSkyB management, a course of action it would only consider amid exceptional circumstances or controversy.

(Editing by David Hulmes)