* Nikkei rises 2.7 pct, Topix up 2.5 pct * Nikkei still on track for longest monthly winning run since 1972 By Dominic Lau TOKYO, May 24 (Reuters) - The Nikkei share average regained ground on Friday after a 7.3-percent dive in the previous session, which most market watchers said marked a long-overdue correction and didn't presage the end of a remarkable six-month bull-run. Thursday's biggest one-day percentage drop in two years was triggered by weak manufacturing activity data in China, Japan's second-biggest export market, as well as worries about an earlier-than-expected roll-back of U.S. stimulus. The Nikkei climbed 2.7 percent to 14,867.90 after trading as high as 15,007.50. Despite Thursday's slide, the index is up 7.3 percent so far this month, on track for a 10th straight month of gains -- its longest such winning streak since 1972. "This shows the strength and the robustness of the market. You are not getting panic investment," said a Tokyo-based analyst, who declined to be identified. "I'm surprised it didn't sell off another day. This goes to show that people want to put assets to work." The Nikkei is up over 70 percent since mid-November, buoyed by Prime Minister Shinzo Abe's policy prescription of aggressive monetary and fiscal policies to revive the world's third-largest economy. Toyota Motor Corp rebounded 2.4 percent and was the second-most traded stock on the main board by turnover, while Mazda Motor Corp jumped 7.2 percent after tumbling 7.6 percent in the previous session. "It's just a speed bump, in my view. The Japanese market is due for a technical correction after strong returns we have this year," said U.S.-based Audrey Kaplan, fund manager of the $656 million Federated InterContinental Fund. "The economic conditions in Japan are substantially better then they were a few months ago. That will support the market going forward," she said, adding that she has increased Japan weightings in her fund to 20 percent from 14.9 percent at the end of March. . Japanese companies' one-month earnings momentum -- analysts' earnings upgrades minus downgrades as a total of estimates -- stood at 9.8 percent this month versus 9.7 percent in April, according to Thomson Reuters I/B/E/S. It was minus 7.2 percent in December. Among Kaplan's top picks in the currency-sensitive exporters were farm equipment and machinery maker Kubota Corp and Toto Ltd, maker of sanitary earthenware and faucets. Kubota was up 2.9 percent and Toto gained 3.3 percent. VOLATILITY EASES The broader Topix index advanced 2.5 percent to 1,218.24 on Friday morning, with volume at 69 percent of its full daily average for the past 90 trading days. The Nikkei volatility index fell 17.5 percent after jumping 58 percent in the previous session when investors' risk appetite took a tumble. Buoyed by the Nikkei's surge since mid-November, Japanese equities' 12-month forward price-to-earnings ratio now stands at 15.9, a level not seen since May 2010, according to Thomson Reuters Datastream. While Friday's rebound came as a welcome relief, the Tokyo-based analyst expects more volatility in the next few sessions. "On the one hand, you have domestic investors who have less regard for valuations. Then you have serious institutional investors who sadly have a master to answer to. As a result they have to justify holding stocks at ridiculous valuations," he said. "It's becoming very hard when you have retail investors who have gone through from 18 percent of turnover to 40 percent of turnover. That's a huge shift. A lot of these moves have put stocks at a pricing level which you cannot justify in conventional methodology."