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It was the Indian's first final in a BWF world tour event in 17 months. He last won a title at the 2017 French Open.
Olympic silver medallist Sindhu, who had won the event in 2017, blew four game points in the opening game to go down fighting 21-23, 18-21 to China's He Bingjiao.
PV Sindhu, a 2017 champion and 2016 finalist, edged out Denmark's eighth seed Mia Blichfeldt 21-19, 22-20 in a closely-fought contest.
B Sai Praneeth and Parupalli Kashyap also advanced to the quarterfinals of the World Tour Super 500 event after contrasting wins in the men's singles competition.
In the group's other fixture, Ukraine came from behind to win 2-1 in Luxembourg.
Earlier, Saina Nehwal had pulled out of the country's blue-riband tournament after failing to recover from acute gastroenteritis.
Momota is the reigning world champion, Asian champion and world number one and he can now add success in badminton's oldest tournament to his glittering CV.
Eighth seeded Saina is expected to take on her nemesis and two-time champion Tai Tzu Ying of Chinese Taipei while the 26-year-old Srikanth will face world no 1 Kento Momota of Japan.
Sameer Verma squandered a first game advantage to go down fighting 21-16, 18-21, 14-21 to former world champion and world No.1 Viktor Axelsen of Denmark.
It was Sindhu and Saina's mentor and current chief national coach P Gopichand, who was the last Indian to win the championship back in 2001.