India recovered from a bad start to reach 71-1 in their response to Australia's first innings of 572 on day two of theSydney Cricket Ground on Wednesday.
India lost their first wicket without a run on the board when Murali Vijay was caught behind off the bowling of Mitchell Starc, but Rohit Sharma ( 40 n.o) and Lokesh Rahul ( 31 n.o) guided the visitors to stumps without further loss.
Earlier, Australia declared at 572-7 just after tea with all top six batsmen scoring above 50, including centuries for captain Steve Smith (117) and David Warner (101).
Skipper Smith strikes purple patch
Smith's milestone matched the feat of Don Bradman and Jacques Kallis in scoring four consecutive test hundreds in a series.
The Aussie skipper became only the third batsman along with Don Bradman and Jacques Kallis to score tons in four consecutive Tests in the same series as his team posted a total beyond 500 for the fourth Test running.
Australia passed 500 for the fourth Test of the series, a feat last registered against the Garry Sobers-led West Indies at home in 1968-69.
Smith was out just before lunch when he was caught behind off Umesh Yadav ending his 208-ball knock spiced with 15 fours.
He has 698 runs in the series at an average of 139.6, placing him third behind Bradman (715) and Ricky Ponting (706) for most runs in a series against India.
Watson again missed out on what would have been only his fifth Test century when, on a flat SCG wicket, he had another brain snap and hoisted Mohammed Shami straight to Ravichandran Ashwin at deep midwicket for 81.
Watson has now scored 24 half-centuries but just four tons in 56 Tests, with his last Test hundred coming against England in Perth in December 2013.
He toiled for 250 minutes and faced 183 balls in putting on 196 runs for the third wicket with Smith.Shaun Marsh added 73 to his 99 in Melbourne before he was caught behind off Shami nearing tea. Marsh batted for 116 balls with nine fours and a six.
Joe Burns, playing in his second Test, was well caught by Rahul in the deep for 58 off 114 balls and Ryan Harris roused the crowd with a lusty 25 off nine balls before the declaration.
It was hard going on the unresponsive SCG pitch for India's bowlers with Shami finishing with five for 112 off 28.3 overs.
When India batted, left-armer Mitchell Starc, bowling with fire and rhythm, slanted one across Vijay and coaxed a snick to wicketkeeper Brad Haddin.
Starc may get into disciplinary trouble for giving Vijay a big send-off, roaring in his face and waving his fists in a fiery opening over as Mitchell Johnson's injury replacement.
India have already lost the Border-Gavaskar Trophy with Australia holding an unassailable 2-0 lead following wins in Adelaide and Brisbane.
The tourists have won only one of their last 22 Tests overseas and have been successful in only one of their 10 Tests at the Sydney Cricket Ground, that sole victory coming 37 years ago.