नित्यं स्मयतेः

Operational rule vidhi

There is invariably the substitution of आ for the diphthong of the root स्मि 'to smile' in the causative, when the astonishment is produced directly through the agent of the causative.

Word by word (padaccheda)

Substitute / term नित्यम् prathamā · ekavacanaTarget स्मयतेः ṣaṣṭhī · ekavacana

Substitute / term Prathamā (1st case): in operational rules, the substitute or the thing introduced; in definitions, the term or its referent.
Target Ṣaṣṭhī (6th case): names what gets replaced, "in place of X" (1.1.49 षष्ठी स्थानेयोगा).

Dotted words are technical terms, dashed ones pratyāhāras (names for classes of sounds or affixes). Hover or tap one to see its card.

Full reading

नित्यम् स्मयतेः

Pāṇini leaves out words that carry over from earlier sūtras. Expand to see the rule as a reader actually understands it.

As a rewrite rule (sketch from case endings)

स्मयतेः → नित्यम्

Replace smayateḥ with nityam. Inherited words (anuvṛtti) may add further conditions.

Commentary

There is invariably the substitution of आ for the diphthong of the root स्मि 'to smile' in the causative, when the astonishment is produced directly through the agent of the causative.
The words णौ and हेतुभय are both understood here. The word नित्य shows that the anuvritti of विभाषा ceases. Thus मुण्डोजटिलो वा विस्मापयते ॥ Otherwise we have कुञ्चिकयैनं विस्माययति ॥ The word भय here is taken to mean स्मयति i. e. 'wondering', 'feeling astonished'. See 1.3.68 where also this meaning has been extended to भय by its connection with भीस्मि together; the proper word ought to have been हेतुस्मये in connection with स्मि, and हेतुभये in connection with भी ॥

Śrīśa Chandra Vasu, The Ashtadhyayi of Panini (1897), via ashtadhyayi.com.