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The S&P 500 dropped 1.6% overnight and is down 2.7% in a week when policymakers were at pains to sound hawkish, even if a peak in rates is near. Federal Reserve officials lifted their 2024 rates projections, forcing investors to dial back bets on cuts next year and driving two-year yields above 5.2%.

Stocks that were in focus included names like Apollo Tyres, which fell 2.89%, SJVN, which dropped 12.91%, and Nykaa, whose shares declined 2.27% on Thursday.

Recent formation of the bullish candlestick pattern suggests a strong reversal from the current levels.

"Over the last six months, the markets overall have had a good run and particularly the performance in the mid and small cap space has been spectacular. This has also led to a tremendous up move in valuation. We are seeing a lot of momentum buying in this space, which is a matter of concern. One must be cautious before entering in lump sum in the market at this juncture. We need to adopt a stock-specific approach in terms of what we buy."

“Currently higher valuation is being paid because there is less amount of floating stock in the market and there are higher amounts of investment tickets, which are basically cheques being cut for higher amounts of investment. As a result, the stocks are going up in a crazy manner. I would like them to be a little bit more decent as far as the valuation is concerned before putting money.”

The yen was also kept under pressure as a result of elevated U.S. Treasury yields, which scaled multi-year highs in the previous session as markets reeled from a hawkish pause by the Federal Reserve on Wednesday.

The Bank of Japan is due to announce its latest policy decision around midday in Tokyo, adding to nerves after Governor Kazuo Ueda hinted in a newspaper interview earlier this month that an end to negative interest rates could come as early as this year.