Sharmila, who needs a few good finishes to ensure she keeps her Ladies European Tour card, was lying 40th after Thursday's first round. Australian Nikki Garrett set a blistering pace as she opened with a career-low round of eight under par 64.
Sharmila started on the 10th and bogeyed the 11th, but she then parred the next 11 holes to be still at one-over after 13.
A second bogey on par-3 fifth put her two over, but she rallied with a birdie on par-5 seventh and another one on par-4 ninth, which was her closing hole. That put her at even par and the cut looked likely at one-over.
The 28-year-old Garrett was out in the first group from the 10th tee and played flawless golf on a beautiful day with temperatures at 27 degrees and little breeze.
Garrett birdied holes 11, 16 and 17 for a back nine total of three-under before picking up five more birdies on the front nine, closing with three in a row from the seventh.
The 46-year-old Trish Johnson, the 2010 Tenerife Ladies Open champion, was second at five-under after a 67 containing six birdies and one bogey. Italian Veronica Zorzi, South African Lee-Anne Pace and Germany's Miriam Nagl carded four-under par 68s to share the third place.
Spain's own Tania Elosegui and the 2010 Spanish Open champion Laura Davies was in a large group at three-under par.