Can I edit my paper after submission if I discover additional literature? While writing my paper, I was unaware of the existence of a sequence and I named the sequence (say X). Later I found that the same sequence is already known with some other name (say Y). Currently if my paper is under review, then can I change to Y according to the literature and resend? Or is it okay to continue with the name X I sent?

Note that the novelty of the paper does not completely rely on the sequence used.
From what you have written regarding the sequence name, it sounds like this it only a question of nomenclature and doesn't substantively affect either your results or the novelty of these results.

If this is indeed the case, then it can easily be amended at revision. Pretty much every meaningful peer review process on a significant article will end up requesting at least minor revisions, since reviewers will generally contribute useful perspective and few manuscripts are without at least some typos. 

If there is a major impact (presumably on novelty), it is a whole different story.  Depending on how large the impact, you might either still want to wait until revision (e.g., if it's going to replace a couple of paragraphs with a citation) or you might even want to withdraw and resubmit a new version of the manuscript (e.g., if it results in dropping an entire section). Even if you need to do something so extreme, however, I would not worry overmuch about consequences: any good editor will respect (and likely appreciate) such a decision.