Pallikal, who played sublime squash to reach the biggest final of her career, was beaten 7-11 11-5 7-11 8-11 by a superior opponent on the day.
The final yesterday saw 18-year-old El Sherbini maintain her stellar form which sent three seeds out of the tournament including top seed Low Wee Wern. The Egyptian had created a furore by shocking World No.1 Nicol David in the World Championship last month.
El Sherbini was quick to share her joy.
Sarah Fitz-Gerald, Pallikal's coach and five-time World Champion, said her protege matched El Sherbini stroke for stroke, but her "fearless" opponent was better in winning crucial moments.
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"Dipika played well but Sherbini hit some great shots at important moments. Both girls got some bad referee decisions but Dipika got a rough one in the fourth game which gave Sherbini a little break," Fitz-Gerald told PTI.
The Chennai girl had beaten eighth-ranked Madeline Perry of Ireland in a 75-minute long semifinal on Saturday.