Sixth seed Sindhu, who was playing her first match since she sustained a stress fracture on her left ankle en route her Commonwealth Games gold in August, lost 12-21, 10-21, 15-21 to Rio Olympics champion Carolina Marin of Spain in 59 minutes.
Lakshay Sen and HS Prannoy, have been drawn to clash in the pre-quarterfinals of the Indonesia Open
PV Sindhu will look to be at her best on the big stage when she begins her title defence at the BWF World Championships beginning in Spain on Sunday.
Carolina Marin had withdrawn from the All England Championships this year after suffering the injury during the Swiss Open. The 28-year-old had announced her plans of making a comeback at the home World Championships beginning in Huelva, Spain.
PV Sindhu, the world number seven, has seen a resurgence in form as she had reached semifinals in the last three tournaments she had played.
Tokyo Games: PV Sindhu passed on her best wishes to Carolina Marin, who will miss the Olympics due to an ACL injury.
Carolina Marin on Tuesday announced that she will undergo knee surgery this week and and would miss the Tokyo Olympics.
Tokyo Games: Olympic champion Carolina Marin has played in five tournaments so far this year, reaching the finals in five of them and winning four.
All England Open Badminton Championships: PV Sindhu will kick off her campaign with a clash against Malaysia's Soniia Cheah and is likely to face Japan's Akane Yamaguchi in the quarterfinals, provided she wins her initial rounds.
World Champion PV Sindhu finished a distant second best in the Swiss Open final after being completely outclassed by Olympic gold medallist Carolina Marin of Spain in the women's singles title clash on Sunday.