The current fall may be only a correction till more evidence appears, it added.
According to Morgan Stanley, the spike in inter-day realised volatility is sharper than usual. It prefers to sell utility stocks and buy technology from a trading perspective.
A Morgan Stanley report said that the market may be coming to the end of its four-year long bull run but added "until the evidence appears, we have to assume that this is just another correction in the bull market."
It noted the uniqueness about the recent decline, which it said is the first in a bull market correction, as India had outperformed the other emerging markets. It said that it was "not surprised" by the outperformance, as it had already noted that the central bank, through some aggressive tightening since the end of 2006, had built ammunition to counter a crisis in domestic liquidity.
Also, the trailing correlation of returns on Indian equities versus emerging markets was lower than in recent corrections. The valuations too were off their highs and at two-year lows relative to emerging markets.
It also noted that the market participants were not as bullish as they were at the start of May 2006 or in February 2007.
