Lundberg and Sandelin were at 13-under 131. Both Swedes started the day two shots behind four first-round leaders. Robert Rock of England (64) was in third.
Daly shot 73 to miss the cut by one stroke after being tied for 76th place at 143. The American also missed the cut at the British Open and at the BMW International Open in June.
Daly had two birdies and a bogey on the front nine, but opened with a double bogey on the back. He made a birdie on the next hole, but a bogey on the par-3 16th left him out of contention.
Lundberg, who won the 2005 Russian Open on the fourth extra hole of playoff for his first European title, opened with a birdie and an eagle that was immediately followed by two bogeys.
He then made two birdies before the turn and five more on the back nine.
I think I actually played a bit better from tee to green yesterday, but I got more out of it today, Lundberg said.
Sandelin, a five-time winner on the European Tour, started on the back nine and had five birdies. He dropped his first hole after the turn, but then picked up a birdie immediately and closed the round with three consecutive birdies.
It was pretty good, Sandelin said. I have been working hard and will do my best and, hopefully, I can get it going over the weekend and I will be even more comfortable.
The first-round leaders had a miserable day. Joakim Backstrom, David Carter and Roope Kakko all shot 73 and were at 138. Fredrik Henge of Sweden (77) was a further four strokes back.
Former top-ranked Russian tennis player Yevgeny Kafelnikov and NHL forward Alex Kovalev, who received wild cards from the organizers, were last in the 144-man field at 25 over and 40 over, respectively.
Over two rounds, Kafelnikov made par at 17 holes and had his first birdie, a big improvement since only making par at four holes in his golf debut in 2005.