Port of Entry Munich for a Visa D issued by Austrian embassy

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Valid for it has mentioned as AT which stands for Austria according to my understanding.

Yes, that is correct.

Does that mean I need to enter schengen territory from Austria.

No, a D-Visa may also be used as a C-Visa for the other member states. This was, in the past, entered as a D+C but since most were issued that way it was simplified.

Transit was always allowed in the past (when there as no +C), but now you can stay as a normal visitor on your way the the issuing country.

The SCHENGEN STAATEN term is only used for C-Visa's.

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