Muniyappa's two-day total stood at 11-under-129 at the Rs. 1 crore event.
Delhi's Kapil Kumar was two shots off the lead in second place as a result of his second round of three-under-69.
While Mhow's Om Prakash Chouhan shot the week's best of 61 to rise to tied third at eight-under-132, 15-year-old junior amateur Aadil Bedi of Chandigarh, the youngest player in the field, shot a second straight 67 to be tied 12th at six-under-134.
Muniyappa (64-65), who began the second round one shot off the lead in tied second, had a slow start to the day as he missed putts from seven to 10 feet on the 10th and 11th that even led to a bogey on the latter.
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The 39-year-old former Indian Open champion then turned on the heat on the greens with four birdie conversions from 10 to 15 feet besides an excellent chip for a tap-in birdie on the first. However, it was the 35-feet birdie conversion on the closing ninth that was the highlight of his round.
"I'll look to achieve a target of 18-under this week in order to have a shot at the title. However, I must admit that it won't be as easy shooting low scores in the last two rounds as there will be more pressure.