Just two Tests into his captaincy, Steve Smith is holding Australia together and taking his own game into rare air.

On a fiercely competitive Boxing Day at the MCG in front of 69,993 people, which will also be remembered as a day of missed opportunities for Australia's batsmen, Smith, unbeaten on 72 overnight, was the glorious exception.

He stopped what could easily have developed into a collapse at 3-115 and guided the home side to a respectable 5-259 at stumps. In the process, the 25-year-old passed 1000 Test runs for the year and by the time he walked off the field on Friday evening his Test average was nudging 50. He wears the captain's blazer well.

Brad Haddin, who came into this match in dire need of runs to shore his place before the end of the summer, held up his end against a barrage of short-pitched bowling. He wore a couple of bruising blows on the shoulder from the Indian quicks bowling around the wicket into his body, and made it to stumps on 23 not out.

Smith led Australia's fightback after the Indian bowlers first dried up the runs in the period after lunch and then removed Chris Rogers and Shane Watson for half-centuries in the space of six balls.

He dropped anchor to ensure there would be no further damage, taking 18 balls to get off the mark, but when the runs came they flowed with the authority of a batsman at the top of his game.

Nor does he back down from a confrontation. A couple of balls after dispatching a Mohammed Shami bouncer to the boundary with a powerful pull shot, Shami hurled the ball back in Smith's direction in his follow-through. While the paceman smiled and waved, Smith responded with some well-chosen words that presumably were not so conciliatory.

Rogers declared Smith deserved to be counted among the best batsmen in the world, up there with the brilliant South African A.B. de Villiers.

"There's definitely an echelon of batsmen at the moment who seem above and beyond," Rogers said. "AB, Davey [Warner] to a certain extent and now 'Smudger'. It's phenomenal to watch and great to be a part of. He's just growing day by day. It's scary to think how good he can be.

"Someone threw a ball back at him today and he had the confidence to say a few words back at him. It looks as if he knows he belongs and knows he's one of the better players in the world at the moment. That's great to see."

His assertiveness means everything to an Australian top seven containing two 37-year-olds who are almost certainly playing in their last Boxing Day Test – Rogers and Haddin, a debutant – Joe Burns, and a No.3 who continues to frustrate more than he delivers with the bat – Shane Watson.

Add to that Shaun Marsh, who made a promising start but edged a loose cut shot on 32. Burns looked compact and confident, taking Ravi Ashwin over the top and hitting a controlled boundary past gully off Ishant Sharma. He got a bottom edge to a cramped pull shot and was out for 13.

Smith was even more important this Boxing Day given Warner, the other Australian with more than 1000 Test runs in 2014, departed for a rare, six-ball duck.

The partnership between Watson and Rogers put Australia in a decent position at lunch, after Umesh Yadav landed the first blow before there was a run on the board.

But a running mix-up appeared to break Rogers' concentration, and the left-hander nicked the next ball from Shami and was caught behind for 57.

It was Rogers' third half-century in as many innings but he chastised himself as he left the field, knowing he had let slip a shot at a century on Boxing Day.

That was certainly the case for Watson. After reaching a handsome half-century in 74 balls, with four boundaries, the Australian No.3 was tied down for several overs by Ishant Sharma and Ravi Ashwin.

Six balls after Rogers' dismissal, Watson tried to sweep Ashwin, missed and was hit in front of off stump. He was lbw for 52. The ball-tracker showed that if referrals had been allowed, the decision would have stayed with the umpire.

A major criticism of Watson as a top-order batsman is that he flatters to deceive, and with 23 half-centuries but just four hundreds from 54 Tests it is a hard argument to contradict.

He and Rogers took advantage of basic lapses by India in the morning session.

Watson was given a life on 37, when Dhawan juggled and then dropped a straightforward chance in the slips off Shami.

There were at least three mis-fields, and a bye let through by captain M.S. Dhoni.

India made two changes to the side that was defeated by four wickets in Brisbane. Rohit Sharma was dropped after managing just 81 runs in four innings, and 22-year-old Karnataka batsman Lokesh Rahul, who has a first-class average of 51, was picked to make his debut. Young speedster Varun Aaron was replaced by Shami.

For Australia, Burns received his baggy green cap from Bill Lawry and Ryan Harris replaced Mitchell Starc, who is yet to play a Boxing Day Test.