It was the worst first week of the new calendar year for the Sensex and the Nifty 50 in seven years, as both ended 1.5 percent lower for the first week of 2023.

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The Sensex closed below the mark of 60,000 on Friday while the Nifty 50 extended its slide below the 18,000 mark to fall towards its recent swing low. The index managed to close just above the 17,850 mark.

Dealers observed that there was selling pressure across the board, adding that 17,800 is a crucial level on the downside for the Nifty 50 index. A close below this level can trigger further sell-off, according to the dealers.

Some key triggers for the upcoming week will include the start of the December quarter earnings season, with TCS reporting results today while the rest of the IT majors following suit this week. Another trigger will emerge in the second half of January, where fresh Emerging Market allocation will take place.

Krishna Kumar Karwa of Emkay told CNBC-TV18 that a structural reset is taking place in the market as interest rates are rising. He also added that the FPIs are currently sellers in the Indian market as it is overvalued compared to other emerging market peers. He further said that while domestic flows have been robust, earnings cuts for the next financial year have not been factored in yet. "The market is currently priced to perfection," he said.

What do the charts suggest for Dalal Street?

Nagaraj Shetti of HDFC Securities observed a long negative candle that formed on the Nifty 50's daily chart on Friday, which indicattes a continuation pattern on the downside. A lack of meaningful upside recovery from the support levels indicates more weakness ahead, he said.

The Nifty Bank index also fell over 400 points on Friday to end 2 percent lower for the week. The index on its daily chart has formed a lower low, according to Kunal Shah of LKP Securities. He sees an immediate hurdle for the Nifty Bank at 42,500 and another one at 42,000. In case these levels are breached, the index may fall towards 41,500, which, according to Shah, will be "the last hope for the bulls."

Dealers that CNBC-TV18 spoke to also suggested that there is apprehension among retail investors as well to buy into the dip. Until recently, selling from FIIs was getting absorbed by domestic buying.

Here are key things to know about the market ahead of the January 09 trading session:

SGX Nifty

On Monday, Singapore Exchange (SGX) Nifty futures — an early indicator of the Nifty 50 index — jumped 150.5 points or 0.84 percent to 18,109.5, thereby pointing to a gap-up opening for the market.

Global Markets

US markets rallied on Friday after the December jobs report and an economic activity survey, which indicated that inflation may be cooling and the rate hikes from the federal reserve are beginning to have their intended effect.

The Dow Jones ended 700 points higher while the S&P 500 gained over 2 percent. The Nasdaq also added another 250 points on Friday. For the Dow Jones and the S&P 500, Friday's gains were the best in a single day since November 30.

What to expect on Dalal Street

Rupak De of LKP Securities sees an immediate support for the Nifty 50 at levels of 17,770, below which the index may fall towards 17,500. On the upside, resistance is seen now at 18,000, a close above which may trigger a recovery.

HDFC Securities' Shetti also says that the Nifty 50 has finished its pullback rally and is currently at the edge of a crucial swing low of 17,780. He sees resistance around levels of 18,050 - 18,100 by next week on the index.

Setup on the Nifty 50 suggests that although the short-term momentum is negative, the risk-reward is not favourable for forming fresh short positions, according to Ruchit Jain of 5paisa.com. He also said that a pullback to relieve the oversold setups on the lower timeframe charts cannot be ruled out.

Jain sees an immediate support for the Nifty 50 at 17,770, followed by 17,650 and further lower at 17,490. On the upside, he now sees an immediate hurdle at the 20-day moving average of 18,170, above which the index can head higher.

Key levels to watch out for

For the weekly options expiry on January 12, the 18,000 strike call of the Nifty 50 added close to 68 lakh shares in Open Interest, while the 17,900 call added 41.6 lakh shares. The 18,100 call saw another 37 lakh shares being added in Open Interest.

On the downside, the 17,800 put added 17.7 lakh shares in Open Interest, followed by the 17,900 put, which added 15 lakh shares. The 18,000 put saw an addition of 8 lakh shares.

Nifty 50's put-call ratio has fell to 0.75 on Friday from 0.97 on Thursday. Indiabulls Housing Finance continues to remain in the F&O ban period.

FII/DII activity

FIIs were net sellers worth Rs 2,902 crore in the cash market on Friday, extending their selling spree for the 11th straight session. On the other hand, after a brief lull, domestic investors purchased Rs 1,083 crore worth of stock on Friday.

FIIs sold Rs 72 crore worth of index futures on Friday while they bought index options worth over Rs 13,500 crore.

Long build-up (Increase in price and Open Interest)

Short build-up (Decrease in price and Increase in Open Interest)

Long Unwinding (Decrease in price and open interest)