Playing her second tournament of the new season, Sindhu came agonisingly close to clinching the title before losing 18-21 21-11 20-22 to Zhang at the Siri Fort Sports Complex.
It was Sindhu's fourth loss in a major final in the 2017-2018, which includes defeats at World Championship, Hong Kong Open and Dubai Super Series Final last year.
Crestfallen after the defeat, Sindhu skipped the mandatory press conference. In fact, Saina Nehwal too had left media awaiting after losing the quarterfinals on Friday.
Sindhu had won twice and lost once at the Indonesia Super Series Premier last year against the American.
Sindhu, however, looked a little rusty early on today as Zhang grabbed an early 3-0 lead.
The American then netted a shot and also hit wide as the Indian made it 3-3. Zhang moved to 5-4 but Sindhu unleashed a smash to draw level.
A couple of smashes by Zhang helped her to open a three point lead but a tight net dribble and then a return at her rivals forecourt saw Sindhu again draw level.
After the interval, Zhang drew parity at 12-12 following a miscued shot near the net by Sindhu. The duo moved neck and neck till 15-15.
Zhang then produced a smash which left Sindhu flat on the court. The American grabbed another point to again open up a two point lead, before leading 19-16.
Sindhu won a video referral next and Zhang then misjudged a return at the forecourt as the Indian narrowed the margin to 18-19. But Sindhu's return went wide twice as Zhang pocketed the opening game.
Sindhu then hit out and netted her return as Zhang grabbed two points but the American struggled with a net return and hit wide as Sindhu grabbed a 11-4 lead at the mid game interval.
Sindhu tried to counter her opponents acute angled strokes with better court coverage and pushed Zhang to make too many unforced errors to lose the second game.
In the end, it was a beautiful drop which helped Sindhu reach 20-11 and she roared back to the contest after Zhang hit out again.
After the lemon break, Zhang hit out twice to allow Sindhu to draw level again. The lead changed hands too frequently as the duo reached 14-14.
Sindhu tried to place the shuttle in difficult positions and reached 15-14 after producing a smash but a weak return next gave the lead to Zhang.
With Sindhu also sending a forehand return wide, Zhang opened up a two point lead at 18-16. But Sindhu again clawed her way back at 19-19 by punishing Zhang for a poor return and pushing the shuttle at the back after leaving her opponent out of position.
Sindhu then hit the shuttle out as Zhang celebrated.
"I had nothing to lose and pressure was on Sindhu. I played a lot of smashes and an attacking game which I generally don't. This is my first major title and I am really happy. I guess it is the best moment of my career," said Zhang, who played without any coach for the last seven years.
Fifth seeded Danish combo of Mathias Christiansen and Christinna Pedersen prevailed 21-14 21-15 over Indonesian pair of Praveen Jordan and Melati Daeva Oktavianti in a 37-minute match to claim the mixed doubles crown, their first title together.
Third seeded Indonesian pair of Greysia Polii and Apriyani Rahayu, who are ranked world no 7, defeated second seeded Thailand combo of Jongkolphan Kititharakul and Rawinda Prajongjai 21-18 21-15 in a 58-minute match to clinch the women's doubles title.
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