Indian National Football League champions Mahindra United suffered their first reverse in Group E of the AFC Cup, going down to Hong Kong's Happy Valley 1-2 in a rain-drenched match at the Mongkok stadium in Hong Kong on Tuesday.

The injury-hit Mumbai team, which had beaten the Hong Kong side 3-1 at home earlier this month, were stunned by two first-half goals by Chun Bong Law. Though captain Yusif Yakubu pulled a goal back in the 24th minute of the second session, they were unable to stave off their first defeat after three straight victories in the tournament.

The defeat shunted Mahindra to second place in the four-team table, behind Singapore Armed Forces, who took the top spot after beating New Radiant (Maldives) 3-2 in another group match.

Both Mahindra and Singapore Armed Forces have nine points from four matches, but the latter occupies the top place because of a better goal difference.

Happy Valley are placed third with six points from four outing while New Radiant are pointless. Only the group winner advances to the next round.

Happy Valley forged ahead in the 21st minute when midfielder Law had the easiest of chances to score from close after Mahindra goalkeeper Sandip Nandy parried a curling shot from Evanor Fantin.

Law was on target two minutes later, latching on to Yiu Cheuk Poon's corner kick from the left.

Ten minutes before half-time goalkeeper Nandy was carried off the field after sustaining a head injury when he attempted to thwart Happy Valley's Sze Ming Lee by falling at the strikers feet.

Mahindra, who dominated much of ther second period, reduced the margin when Yusif capilalised on a long clearance and placed the ball past goalkeeper Chun Yip Fan.