autocomplete(chips): popup selection list has an invalid default selection when opened the second time

[p4pramod]

Actual Behavior:

• The md-autocomplete in chips selection is not showing selected index in the auto complete after one chip is added.

• After adding the first chip through autocomplete, when we search another text the suggestion should show nothing as selected unless user uses down arrow on keyboard.

CodePen (or steps to reproduce the issue): *

• this issue can be replicable in the demo of chips page
  https://material.angularjs.org/latest/demo/chips

• Go to -Custom Inputs

then go to "Use md-autocomplete to build an ordered set of chips." section. add Broccoli and then type "C". If possible try adding and deleting the chips. Please verify the selected index of the suggestion box provided by autocomplete.

[jjtheo]

I've had the same problem, and I can't find any solutions.
I made this jsFiddle to try a few things : https://jsfiddle.net/JJTheo/9z34r9rc/2/

[Splaktar]

It was a little hard to understand this, but I was finally able to reproduce it. On the appearance of the second popup, an item is selected by default when it should not be. I was able to reproduce in 1.1.7.