Australia paceman James Pattinson continued his excellent start in Test cricket with four wickets as India were bowled out for 191 on the opening day in Sydney.
Pattinson, in just his fourth match, claimed 4-43 and was well supported by fellow seamers Ben Hilfenhaus (3-51) and Peter Siddle (3-55) after the tourists had opted to bat first.
Sachin Tendulkar hit 41 and Mahendra Singh Dhoni was left unbeaten on 57 on an otherwise miserable Indian card.
Zaheer Khan struck three times with the new ball to reduce Australia to 37-3 before Australia captain Michael Clarke (47no) and his predecessor Ricky Ponting (44no) counter-attacked late in the day.
Australia, who lead the four-match series 1-0, closed on 116-3, a deficit of 75.
Dismal
India made a dismal start as Gautam Gambhir (0), Rahul Dravid (5), Virender Sehwag (30) and VVS Laxman (2) all fell before lunch.
Pattinson was the chief destroyer in the opening session claiming three wickets. The 21-year-old, who was man of the match in two of his first three Tests, struck with just the third ball of the match to remove Gautam Gambhir.
The out-of-form opener probed at a delivery from the Victorian, the ball catching the edge and presenting Clarke with a simple catch at first slip.
That brought Dravid to the crease but he departed for five when Ed Cowan took a smart catch at short leg off Siddle's bowling.
Sehwag was dropped on 23 by Ponting off the bowling of the luckless Hilfenhaus, but hardly made the most of the reprieve.
Seven runs later he flashed at a delivery from Pattinson and Brad Haddin was untroubled to accept the big nick.
Laxman's horror tour continued when he was caught at third slip by Shaun Marsh off Pattinson.
Tendulkar looked in ominous touch but will have to wait another day for his 100th international century after dragging a wide ball from Pattinson onto his stumps for 41 in the middle session.
Dhoni and Ravi Ashwin put on a valuable 54 runs for the seventh wicket before Hilfenhaus removed Ashwin (20) and Khan (0) with the final two deliveries of the session to reduced India to 178-8 at tea.
Dhoni came out swinging at the resumption, reaching his maiden half-century on Australian soil with a blistering cover drive off Siddle before running out of partners.
Sharma departed for a duck when he fended a short ball from Hilfenhaus straight to Cowan at short leg before Umesh Yadav became Siddle's 100th Test victim when he edged behind to Haddin.
Wickets continued to tumble at the start of Australia's reply, Zaheer removing David Warner (eight), Shaun Marsh (0) and Ed Cowan (16).
Warner was first to depart when he edged to VVS Laxman at second slip.
Laxman fumbled the regulation chance but Sachin Tendulkar snaffled the rebound to send the dangerous left-hander trudging back to the pavilion.
Marsh fell to an almost identical delivery from Khan at the start of the paceman's next over, but this time Laxman made no mistake to send the batsman packing for a golden duck.
Cowan was Khan's next victim when he was trapped in front of his stumps, leaving Australia in some trouble with less than 10 overs gone.
Clarke joined former skipper Ponting at the crease and the experienced duo helped put their side in the ascendancy by the close with a quick-scoring 79-run stand.