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Commonwealth Games bronze medallists Treesa Jolly and Gayatri Gopichand notched up a 22-20, 17-21, 21-18 win over France's world No. 29 Margot Lambert and Anne Tran in their opener.
Prannoy ran out of steam in the 84-minute contest, losing 16-21, 21-19, 10-21 to the 21-year-old Naraoka.
Commonwealth Games bronze medallists Treesa Jolly and Gayatri Gopichand fought hard before going down 13-21, 21-15, 17-21 to Bulgaria's Gabriela Stoeva and Stefani Stoeva in the women's doubles pre-quarterfinals.
Sixth seed Sindhu, who was playing her first match since she sustained a stress fracture on her left ankle in August, lost 12-21, 10-21, 15-21 to Carolina Marin of Spain in 59 minutes.
Lakshya Sen would be the second men's singles player in the squad while Aakarshi Kashyap would provide backup to Sindhu in women's singles.
This was Prannoy's second career win over Axelsen, whom he had beaten during the Indonesia Masters last year.
With two losses, Prannoy's chances of making it to the knockout stage is as good as over and rests on results of multiple calculations.
India's singles ace went down to the rising Japanese star in an hour-long contest.
While Sharath is the lone Khel Ratna award recipient, 25 sportspersons, including shuttlers Lakshya Sen, H S Prannoy, woman boxer Nikhat Zareen, track and field athletes Eldhose Paul and Avinash Sable, were conferred with the Arjuna Award.
25 sportspersons will receive the Arjuna Award from the President on November 30.