Shankar totaled 10-under-134 for two days at the Digboi Golf Links.
Jaipur's Vishal Singh shot the day's joint best score of 67 to be placed second at eight-under-136.
The cut fell at three-over-147. Fifty-two professionals made the cut.
Shankar (65-69), the overnight leader by three shots, seemed to be heading for another low score as he was chipping it to perfection in the first half of the round.
Shankar produced two chip-ins for birdies and landed it within a few inches on two more occasions to be five-under through the first 11 holes.
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"Everything was going for me on the first 11 holes but then it fell apart. It was as if I played on two different courses. I chipped brilliantly in the first part of the round but the bogey on the 13th changed it all. I just lost focus. I missed short putts and chipped poorly from there on," Shankar said.
"The third round will be decisive. I'll need to stay focused throughout if I have to carry a good lead into the final round. The course conditions are outstanding this year and the Digboi Golf Links has never played better," he added.
Jamshedpur's Karan Taunk, the leader in the 2014 Emerging Player of the Year list, was red hot through the first 15 holes as he put together seven birdies against a lone bogey to be six-under for the day. However, bogeys on the 16th and 17th restricted the 25-year-old to a round of 68 and a share of third place at seven-under-137 along with Sri Lankan N Thangaraja. Thangaraja's 67 was the day's joint best score.