Shane Watson, the Australian allrounder, has said his team has not given up hope despite being 301 runs behind India after the third day.

Watson top scored with 78 in Australia's first innings of 269, but the visitors were further away by stumps when India sped to 100 without loss. An Indian declaration is expected during the fourth day, probably in the second session, but Watson was not daunted by the potential for a huge chase.

"I think we can win it," he said. "If we're set 430 or something in four or five sessions, I've got no doubt, if we bat well, we can chase down anything. The wicket is still playing well. There's a bit of turn and the ball will go reverse. If we bat extremely well, I really believe we can chase down anything."

Watson said the bowlers were disappointed to let India's openers, led by Virender Sehwag's 53, to race away in the 23 overs before stumps. "We know we're still in it, but we'll have to play two really good days of cricket," he said. "We're never down and out until the game is over."

Australia will need to bat a lot better in its second attempt after faltering against the legspin of debutant Amit Mishra, who took five wickets, and the swing of Ishant Sharma and Zaheer Khan.

During Watson's 73-run eighth-wicket partnership with Brett Lee, the batsmen were warned by the umpires about their verbal exchanges with the India bowlers. "They [the officials] were hoping it wouldn't get out of control," Watson said. "It was actually a lot of extremely friendly banter, I thought. Brett and me were having a great time out there, laughing. The quicks were having a good crack, as they do. It never was going to get out of hand."

It was a breakthrough innings for Watson, who is playing his fifth Test in an injury-plagued career, and he collected his first half-century. He remained calm in the mid-innings crisis when Australia were reduced to 167 for 7 and steered a useful recovery.