Md Zamal Hossain Mollah of Bangladesh also struck the week's joint best score of 63 to end the day in second place at 12-under-130 at the Rs 75 lakh event.
The halfway cut went at one-under-141. Fifty-four professionals made the cut at the Golmuri Golf Course.
Sharma (64-63), the overnight leader by one stroke, established a healthy halfway lead after he produced an error-free 63 on Friday.
The 20-year-old Sharma, who went one better than his first round of 64, made an explosive start to the day with birdies on his first three holes, the 10th, 11th and 12th.
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Zamal (67-63), who was three off the lead in tied eighth after round one, zoomed up the leader board with an equally impressive 63 that featured nine birdies and a bogey. Zamal chipped brilliantly in round two and landed his shots within five feet of the flag on five occasions to set up birdies.
Chandigarh's Abhijit Singh Chadha, who made an eagle-two on the fourth, returned a 67 to be placed third at nine-under-133.
Rolex Ranking leader Shamim Khan (68) of Delhi was tied 12th at six-under-136.
Defending champion Mukesh Kumar (70) of Mhow closed the second round in tied 44th at one-under-141.
Among the notable names that missed the cut, were Bengaluru's Chikkarangappa (even-par-142), local lad Karan Taunk (two-over-144), Delhi's Honey Baisoya (seven-over-149), who is currently third in the Rolex Ranking.