Domestic markets are expected to open on a cautious note on Thursday. The sudden fall on Wednesday caught most investors off guard. The panic selling triggered a sharp fall across the board.

Gift Nifty at 21,114 indicates a steady start at Nifty Dec futures on Wednesday, closed at 21,217, and Jan futures at 21,316.

However, analysts expect the market to see value buying, particularly in the large-cap space. However, some small-cap and mid-cap stocks may come under pressure.

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Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas, said the steep fall in the market across indices was primarily led by profit booking at higher levels, coupled with concerns around the rising covid cases, and potential geo-political tension due to the impact on shipping routes in the Red Sea region arising out Houthi militias from Yemen has dented the investor sentiments.

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There are hardly any margins of safety left in some pockets of mid- and small-caps after a significant run-up; thus, taking out some froth is healthy for the market, he added.

Asian stocks are down in early deals on Thursday between 0.5 per cent and 2 per cent. US stocks, too, fell overnight.

“Nevertheless, India’s structural story is getting stronger with stable government, healthy corporate earnings outlook and improving macro picture. Hence, any material dip could again provide investment opportunity in quality stocks,” Sanjeev Hota said.

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Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said: Markets were on a record-setting spree for a while and have been in an overbought zone, so hiccups were expected in the form of profit-taking, which came to the fore today. Redemption was seen across the sectors; even mid & small-cap stocks came under strong bear hammering. Volatility is likely to be the hallmark in the near term, with India’s VIX jumping over 4% in a day.

“Amidst overbought technical conditions, key benchmarks may consolidate in the near term, but that said, the medium-term outlook continues to be in favour of the bulls but only on any steep corrective declines. Technically, support for Nifty is seen at 20917-20707, while the index may face resistance at 21953-22001 levels,” he said.