Serene Demon Sword replaces Demon Decapitation when Luka learns it. It is a water and an iai type of skill that pierces through an enemy’s defense with ease.
Drawing the sword from the sheath and attacking with a fluid slash, is a 2 SP skill which does higher damage than a normal attack. Combined with Undine, this attack becomes significantly more powerful, and cancels Luka out of his Serene Mind state. At Undine Level 3, Luka is not cancelled out of his Serene Mind state, and simply does more damage with her power used. Overall, it is his most powerful technique, even above Vaporizing Rebellion Sword in terms of SP cost.
After the third battle with Granberia and Luka finished recuperating, Alice teaches him this skill as a "reward" for mastering the Serene Mind.