There's nowhere to go but up—that's the story for European equities according to Morgan Stanley.

On Wednesday, the bank identified 20 oversold European stocks that it said could pose investment opportunities given recent market volatility—including big names like Credit Suisse, Prudential, BMW and Intesa. In a research note, Morgan Stanley analysts led by Graham Secker said there was high probability that Europe stock markets would be higher in three months' time.

They forecast that the current volatility would be short-lived, rather than the start of a "long and painful bear market.

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Global stocks have been hard-hit in recent days, with ferocious volatility in markets due to fears of a Chinese economic slowdown and an imminent hike by the U. Federal Reserve to interest rates. Morgan Stanley's stock picks were spread across industries, with several telecommunication services represented, including Dutch KPN, Danish TDC and Norwegian Telenor.

Several financial giants were also present, such as BNP Paribas, Credit Suisse, Intesa Sanpaolo and Prudential. The MSCI Europe index is down 16 percent from its April peak, which is comparable to similar troughs seen over the last 40 years, according to Morgan Stanley. Corrections tend to be "V-shaped," Morgan Stanley said, with stocks historically rebounded between three and 12 months later.

The bank has issued a "full-house buy signal" for European equities, based on market indicators that include valuation, fundamentals and risk. It's the fifth time since that Morgan Stanley has tr binary options such a call, with four of the recent calls occurring during the market downturns of and Martin luther king stock market open diversified technology company, Philips, is Morgan Stanley's "top pick" given its exposure to healthcare spending, which is picking up across Europe and North America.

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Kalyeena Makortoff Blog Writer, CNBC.