Watford canned a trio of 3-pointers en route to 16 points and grabbed eight rebounds while Zeller added 15, five boards and four steals as the Hoosiers (14-1, 2-0) rolled to their fifth straight win.
Jordan Hulls contributed 14 points and Victor Oladipo chipped in with 10 and six rebounds for Indiana, which shot a sizzling 52.4 percent from the field in the victory.
The Nittany Lions (8-6, 0-2), meanwhile, went just 5-of-18 from 3-point range in taking the loss.
Ross Travis netted 14 points and Jermaine Marshall added 11 with seven boards in the setback.
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