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Panesar got the ball to turn sharply off the first morning track after coming on to bowl the seventh over to send back India's Big Two -- Virender Sehwag (playing his 100th Test) and Sachin Tendulkar -- in 11 balls after James Anderson gave England an early break by dismissing Gautam Gambhir off the second ball of the match at the Wankhede Stadium.
Panesar, who made his debut against India in 2006 at Nagpur, had figures of 2 for 29 in 11 overs at lunch as the hosts, opting to bat first after winning the toss, adjourned at 87 for 3 with first Test double centurion Cheteshwar Pujara (38 in 86 balls) and Virat Kohli (6 off 26 balls) at the crease.
India went into the Test with three spinners for the first time in six years and they had the chance to bat first on the track that offered some pace and bounce initially.
But the hosts, 1-0 ahead in the four-match series after winning the opening Test at Ahmedabad by nine wickets, were pulled back when Anderson packed off Gambhir off the second ball of the match.
Gambhir, who flicked the England pace bowler to mid wicket off the first ball, missed the next while trying for a
similar shot to leg and was struck in front by Anderson. Umpire Tony Hill upheld the appeal to leave India 4 for 1.
Sehwag, playing his 100th Test and honoured by the Mumbai Cricket Association prior to the commencement of the match, started off with an excellent front foot off drive off Stuart Broad before the second wicket pair was confronted by the left-arm spin of Monty Panesar from the seventh over.
Panesar, who replaced Anderson, was smashed to the long on boundary by Sehwag off the second ball he faced while Pujara drove him handsomely to the extra cover fence to keep up the tempo.
Broad was replaced by Anderson after a five-over spell and the England pacer was a bit unlucky when Sehwag edged him past the leg stump almost immediately for a four and then edged the bowler wide of the slip cordon for another.
The first hour produced 50 runs in 15 overs and Pujara, who had struck his maiden unbeaten double hundred at Ahmedabad to win the man of the match award, slashed Anderson perilously close to gully fielder when on 17.
However, it was Sehwag who departed for 30 off a full length Panesar delivery that he tried to flick and missed to be bowled.
Sehwag, who had scored a run-a-ball 117 in the Test series opener, fell after facing 43 balls and hit 4 fours in his 73-minute essay. He added 48 runs in 96 balls with Pujara.
Sehwag's dismissal brought in Sachin Tendulkar who looked in good nick, flicking Panesar for a four before the spinner beat with a well-spun ball that pitched in front of the batsman, turned sharply and took the off stump as he tried to turn it to leg.
Panesar, surprisingly left out of the series-opener, proved his worth by sending back the two top Indian batsmen in his sixth and seventh overs to leave the home team struggling at 60 for 3.
Pujara, who looked on bemused from the other end, and Kohli prevented further damage before lunch by adding 27 runs for the fourth wicket. The former even struck Broad for successive fours close to the interval.
Off spinner Graeme Swann was brought on close to lunch to bowl the 24th over when India were 77 for 3 and was immediately driven to the extra cover fence by Kolhi.