The Indian batters especially found it difficult to tackle Hazzlewood's outswingers as he picked up all three wickets this morning using that delivery.
First Hazzlewood accounted for Rahane, in only the third over of the day, with a beauty of an outswinger. Rahane was struck at the crease and only managed to edge it to wicketkeeper Brad Haddin, who registered his fifth catch of sixth dismissal of the innings.
Rahane's dismissal brought skipper Dhoni (33 runs, 53 balls, 4 fours) at the crease but despite Rohit being set at the other end, runs dried up.
Watson (1-39) then removed Rohit in the 92nd over. The talented Mumbai batsman went for a drive to a wide delivery only to loft it in the air and young Australia captain Smith held a beautiful catch at the second slip, diving low to his right.
It brought Ashwin (35 runs, 41 balls, 6 fours) at the crease and together with Dhoni and the duo added 57 runs for the seventh wicket in quick time.
Dhoni and Ashwin's 50-run partnership came off just 54 balls in the 101st just after India reached the 350-mark had in the 96th over.
The duo was looking good for a lot more, but Hazlewood had other plans when he returned to the attack in the 103rd over.
Ashwin had looked good so far, playing with his usual comfort and solidity, but he received a good outgoing delivery from the debutant bowler and only ended up edging it behind to Watson at first slip.
Two overs later, Hazlewood removed Dhoni as well, the batsman looking to leave an inswinging ball only to edge it to Haddin.
While India's 400-mark came up in the 107th over, Nathan lyon (3/105) thereafter polished off the tail with two quick wickets. His first victim was Varun Aaron (4) as substitute fielder Marnus labuschnage held a stunning catch at forward short leg. It was supposedly the last delivery before lunch but the fall of wicket extended the session by half an hour.
In reply, Australia started their innings on a brisk note with Warner and Rogers adding quick 47 runs for the opening stand.
But India picked up three crucial wickets in the post-lunch session to pull Australia back.
Yadav dismissed Rogers (55 runs, 79 balls, 10 fours) just at
the stroke of tea to bring India back into the contest.
Australia were 121 for three in 24.5 overs at the break in reply to India's 408 all out.
While Aaron mended his ways from the first Test and displayed much better control of the ball, Ishant proved to be expensive as he went for 29 runs in just three overs.
Warner was at his aggressive best as he gave a speedy start to Australia's innings once again. He struck six fours in his short stay at the wicket and as a result Yadav was brought into the attack in only the seventh over.
Playing his first Test since 2012, Yadav not only bowled the quickest delivery of the match, but also removed the dangerous-looking Warner. The batsman went for a pull but only ended up mistiming the shot, caught at first slip by R Ashwin (1/5).
Warner's wicket brought Shane Watson (25 runs, 29 balls, 4 fours) to the crease and he did not let the momentum down scoring at a brisk pace.
With Rogers, he added a quick-fire 51 runs for the second wicket. Their 50-run partnership came off only 63 balls in the 19th over.
With Rogers and Watson finding it easy against the pacers, Dhoni introduced spin in the 18th over and Ashwin struck in his second over.
Ashwin removed Watson when the batsman stepped out in search of a big shot but mistimed it only to find Shikhar Dhawan at mid-on, who took a fine low catch.
Rogers then brought up his sixth Test half-century in the 21st over as also the Australian 100-run mark. He faced 73 balls to get there and snapped his run of eight innings without a fifty.
With tea round the corner and the match in balance, Rogers added 23 runs with Smith but got out just prior to the break, handing India the initiative.
He clipped a Yadav delivery to give Dhoni a simple catch behind the stumps.
But Smith and Shaun Marsh then joined hands and resurrected the Australian innings with an 87-run stand for the fourth wicket.
The duo mixed caution with aggression to score their runs and take Australia forward.
The Australian 150-mark came up in the 37th over, while the duo brought up the 50-run mark for the fourth wicket off 87 balls in the 40th over.
Smith was severe on Ashwin, picking up 14 runs with two sixes and one four. He then brought up his 10th Test fifty off 68 balls in the 44th over of the innings.
But in the very next over, India had their big moment, when Shaun Marsh mishit a short delivery off Varun Aaron (0/59), only for Ajinkya Rahane to drop the skier after calling for it. He was batting on 32 at that time.
But thankfully the drop catch did not hurt India much as Marsh lasted for only two more overs before Yadav enticed the left-hander him to drive and in the process get a big nick which was brilliantly pounced at the first slip by Ashwin.
Mitchell Marsh then came out to bat at his designated spot in the order, despite not fielding since lunch yesterday owing to a right hamstring injury.