Left-handed Nedunchezhian won the first set 7-6 (5) but after losing the second 4-6, decided not to continue, feeling low on energy.
"It was a bad day.. Nothing much. I was not feeling well. even on day one and after having lunch yesterday it became worse. I fly home tonight, take some days off and then go to Germany for pre-season training," Jeevan said.
Margaroli had no control over his shots in the opening set as he hit everything out but curbed his errors to put up a fight in the second.
He broke Balaji twice to be in a position to serve out the set but the Indian broke back and clinched the issue in the tie-breaker.
Balaji now faces sixth seed Ramkumar Ramnathan, who ousted qualifier Sasi Kumar Mukund 6-3 6-1. Fifth seed V M Ranjeet also progressed to the quarterfinals with a 6-2 6-1 win over Ashwin Vijayragavan.
Jeevan was not the only player to retire. Ronit Bisht also retired from his second round against Jung-Woong Na when he was trailing 5-7 0-3.
Arjun Kadhe also made an exit with a 4-6 5-7 defeat against German Torsten Wietoska while Abhijit Tiwari lost 4-6 2-6 to Markos Kalovelonis of Greece.
