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Premier off-spinner Nathan Lyon took his second eight-wicket haul in Test cricket to bowl out India for 169 and put Australia on the verge of a victory at the close of a chaotic day two's play in third Test at the Holkar Stadium on Thursday.

For India, top-order batter Cheteshwar Pujara stood tall with a valiant 59 off 142 balls in the second innings, through his precise footwork and judicious shot selection on a difficult pitch.

But rest of the batters, barring Shreyas Iyer and Ravichandran Ashwin to some extent, couldn't step up, as Lyon finished with 8/64 and giving a target of 76 for Australia to make the series scoreline 2-1 on day three.

In the morning, Australia took a lead of 88 runs as Umesh Yadav and Ravichandran Ashwin took 3/12 and 3/44 respectively in the first session to bowl out the visitors for 197.

While Umesh was efficient with his exhibition of reverse swing and reached to 100 Test wickets at home, Ashwin was able to extract turn, and use it with flight to trigger an Australian batting meltdown, as they lost their last six wickets for just 11 runs in 28 balls in a stunning batting meltdown.

The first hour of the morning session belonged to Australia as India were unable to make breakthroughs in 16 overs. Resuming from 156/4, Ravindra Jadeja found some turn, but it wasn't much to threaten Peter Handscomb and Cameron Green.

Green got the first boundary of the day by driving past mid-off against Mohammed Siraj, and then danced down the pitch with a straight bat to take another four off Jadeja. Handscomb was compact in defence, but when trying to defend off Ashwin, the ball spun in sharply and took the inner edge to forward short leg.

Green was next to depart, trapped lbw by Umesh in front of the stumps. Coming from around the wicket, Umesh produced a gem to beat the outside edge of Mitchell Starc and send his off-stump on a cartwheel ride.

Ashwin struck again when he had Alex Carey playing down the wrong line and was firmly beaten on the inside edge, trapping him lbw. After Umesh sent Todd Murphy's off-stump on a walk, Ashwin finished off the innings as Lyon wanted to sweep, but missed the ball and saw his stumps in disarray to complete an Australian batting meltdown.

After being wicketless for first 4.5 overs, Lyon drew first blood as Shubman Gill danced down the pitch for an expansive slog. But the right-handed opener missed the delivery as it turned to go through the gate and smash the stumps.

Pujara took his time to get going and got his first boundary by driving an overpitched delivery from Lyon through cover. But the off-spinner struck again in his next over to trap Rohit Sharma right in the crease for lbw, with the Indian skipper burning a review too.

With Australia rotating their troika of spinners, Pujara and Virat Kohli tried to keep them at bay with defence and getting some boundaries. But Matthew Kuhnemann took out Kohli, shaping for a pull, with a short ball which stayed low and hit him right on the back pad in front of stumps.

With a lower backlift and staying low, Pujara was able to breeze through, smashing a short ball from Kuhnemann in the gap between mid-on and mid-wicket for a boundary, followed by dancing down the pitch to drive past non-striker for another boundary.

But before Ravindra Jadeja could get going, Lyon trapped him lbw below the knee roll and Australia saw his back through a review. When tea came, Pujara and Shreyas Iyer ensured India didn't suffer any more loss of wickets.

The final session began with Pujara and Iyer taking a four and six off an erring Kuhnemann. Iyer, who lowered his stance, got back-to-back fours off Lyon through lucky outside edges.

Iyer's aggression paid off when he pulled off Kuhnemann for four and six respectively. But his knock ended at 26 when Usman Khawaja took a one-handed stunning catch at mid-wicket off Starc.

Lyon had further success when KS Bharat played the wrong line and was trapped lbw. After Pujara reached his fifty, he was dropped by Marnus Labuschagne and found some support from Ashwin.

But that was short-lived as Lyon trapped Ashwin lbw with a quicker delivery. Pujara marched forward and showed aggression by whacking Lyon over mid-wicket for six. His knock though was cut short by a stunner from Steve Smith, who dived to his right to take a one-handed screamer at leg-slip off Lyon.

Two balls later, Lyon had another wicket as Umesh slog-swept straight to deep mid-wicket. Four overs later, Lyon finished off the Indian innings by getting Siraj stumped out.

Brief Scores: Australia 197 in 76.3 overs (Usman Khawaja 60, Marnus Labuschagne 21; Ravindra Jadeja 4/78, Umesh Yadav 3/12) trail India 109 in 33.3 overs and 163 in 60.3 overs (Cheteshwar Pujara 59, Shreyas Iyer 26; Nathan Lyon 8/64) by 76 runs