The 31-year-old was back in the line-up having been one of four players suspended for the third Test for disciplinary reasons, and was also named as captain when Michael Clarke was ruled out with a back problem.
However, there was little he could do to turn around his team's fortunes as they struggled once more against India's bowlers in Delhi. Ravichandran Ashwin (three), Ishant Sharma (two) and Ravindra Jadeja (two) shared the wickets as the home side look to complete a series whitewash.
Only a late rally from Steve Smith, Peter Siddle and James Pattinson after tea revived the tourists.
Watson won his first toss at the Test helm and opted to bat first, but soon saw David Warner heading back to the pavilion for a duck. Warner departed in only the second over, a lack of foot movement to Sharma's fourth ball resulting in a thick edge to second slip, where Virat Kohli snaffled a neat catch.
Fellow opener Ed Cowan survived a scare in Sharma's second over, Mahendra Singh Dhoni appealing for caught behind but the umpires correctly ruling there had been no nick.
Phil Hughes, batting at number three, quickly found his rhythm, hitting Bhuvneshwar Kumar for three fours in the seventh over and two more when the paceman was replaced by off-spinner Ashwin.
But his progress was ended when he was caught in two minds by a short-of-a-length ball on Sharma's return, and chopped an inside edge on to his stumps. That brought the stand-in skipper to the crease, Watson easing any nerves over his new role by despatching the fourth ball he faced to the boundary with a leg-side half-volley.
Watson and Cowan saw Australia through to 94 for two at lunch, but things quickly went downhill for the tourists in the afternoon session. Cowan was on 38 when Ashwin claimed his first wicket, bowling the opener round his legs, but it was Watson's wicket for 17 that was particularly celebrated by India.
Jadeja's delivery drew Watson away from his stumps and Dhoni was quick to whip the bails off to leave their opponents on 115 for four. Matthew Wade quickly followed for two, pushing Ashwin to Murali Vijay at silly point, before Glenn Maxwell threw away his wicket by prodding a ball from Jadeja straight into the hands of Sharma.
Mitchell Johnson, another of the suspended quartet to miss the third Test, added just three runs to the board before he also succumbed to a delivery from Ashwin.
Steve Smith, unbeaten on 25 at tea, batted through to 46, while by the time stumps were called Siddle had eclipsed him on 47 not out. James Pattinson had provided 11 runs of his own in a partnership for the ninth wicket worth 42, but despite the tail's fightback it was India's day.