Bhubaneswar: Nepal scored twice in the opening seven minutes to stun host India 2-1 in their Gold Cup tie at the Kalinga Stadium in Bhubaneswar on Monday.
India, having opened their campaign on Saturday with a 1-0 win over Islamic Republic of Iran, were looking to seal their spot in Friday's final with three points against Nepal.
Nepal, however, needed to win to keep their campaign hopes alive after having lost 3-0 to Myanmar in their opener and they started with an aggression that caught India off guard.
Nepal took the lead just five minutes in as Sabitra scored despite India goalkeeper Aditi Chauhan making a valiant bid to deny the ball from settling in the back of the net.
Two minutes later, Nepal doubled their lead and unfortunately for India, the goal was the result of a Chauhan error which Sabitra quickly pounced on.
The Indian fans did their part in pushing the team but as the referee blew for half-time, the home team had made no inroads.
India pressed in the second half and thought they had reduced the deficit when the ball sailed into the net in the 74th minute, only for the effort to be ruled offside.
Their efforts, however, saw India rewarded in the 82nd minute with Ratanbala Devi scoring from a free-kick but a second goal eluded them.
India will now have to defeat Myanmar, who defeated Iran 2-0 in the day's earlier match with Yee Yee Oo scoring twice in second half added time, in their final group match to keep their hopes alive.
Should Nepal defeat Iran, goal difference will come into play if India beat Myanmar.
Photos: All India Football Federation