"Despite robust data and strong Ebitda growth, the market is concerned about the impact of new entrant RJio with newer and faster technology. However, our case studies suggest these fears are overdone," it said in a note.
The US-based financial services company said telecom stocks have underperformed over the last 12 months despite good operational revenue and robust growth on the data front.
However, anticipation of the entry of RJio with its faster 4G services has resulted in some concerns, it said.
The launch of RJio's 4G services has been getting delayed for long and Reliance Industries Chairman Mukesh Ambani had in June announced it will be launching the services in a phased manner starting 2015.
In the note, Morgan Stanley said RJio may be able to garner 11 per cent of the wireless market share, including 8 per cent on the voice front, and 20 per cent on the data side, by FY18, only if it is able to expand the market.
"In our eyes, the market share will only be possible if it (RJio) becomes a market expander."
Ambani re-entered the key sector with the June 2010 acquisition of a little-known firm Infotel Broadband Services Pvt Ltd (IBSPL), which successfully bid for a pan-India 4G licence. In May 2010, he had ended a non-compete pact with younger sibling Anil, who had got the telecom business during the 2005 split.
RJio has a planned investment of Rs 37,000 crore into the telecom sector over the next few years.