The Beginning of the End of the Mughal Empire:
By the mid-17th century, politics in the Deccan were ready for yet another tectonic shift. Mughal prince Aurangzeb spent most of his time in the Deccan fighting local Hindu and Muslim kingdoms to establish and enforce Mughal Sovereignty. The rise of Maratha power under Shivaji kept the Mughals constantly challenged. After the death of Shah Jahan in 1666, Aurangzeb consolidated his power in Delhi as Emperor and returned to the south. He spent most of his imperial reign in military camps in the Deccan, in an almost desperate campaign to expand the empire beyond the greatest extent it had reached under Akbar. The biggest prize in his eyes was the rich city of Hyderabad, protected by the reportedly impregnable fort of Golconda.

Hyderabad Falls to the Mughals:
Aurangzeb laid siege to Golconda in 1686. Golconda held fast under months of siege, and Aurangzeb had to retreat in frustration. Aurangzeb returned in 1687 and laid siege for 9 months camping in the Fateh Maidan ("victory field," now the Lal Bahadur Stadium). Local legend has it that the fortress held on, but the gates were opened at night by a saboteur who was bribed by Aurangzeb. Sultan Abul Hassan Tana Shah, the seventh king of the dynasty, was taken prisoner. Hyderabad's independence was eclipsed. Aurangzeb's efforts would turn out largely in vain, with Hyderabad remaining in Mughal hands for less than four decades.

For a few decades, Hyderabad declined, and its vibrant diamond trade was all but destroyed. Aurangzeb's attention moved away quickly to other parts of the Deccan, with the Marathas slowly but steadily gaining ground against the Mughals.

Viceroys Become Kings:
With the emaciation of the Mughal Empire after Aurangzeb's death in 1707, the
Mughal-appointed governors of Hyderabad gained more autonomy from Delhi. In 1724, Asaf Jah I, who was granted the title Nizam-ul-Mulk ("governor of the country") by the Mughal emperor, defeated a rival official to establish control over Hyderabad. Thus began the Asaf Jahi dynasty that would rule Hyderabad until a year after India's independence from Britain.

Hyderabad Starts Growing Again:
Asaf Jah's successors ruled as Nizams of Hyderabad. The rule of the seven Nizams saw the growth of Hyderabad both culturally and economically. Hyderabad became the formal capital of the kingdom and Golconda, the former capital, was all but abandoned. Huge reservoirs, like the Nizam Sagar, Tungabhadra, Osman Sagar, Himayat Sagar, and others were built. Survey work on Nagarjuna Sagar had also begun during this time.

A Delicate Balancing Game:
When the British and the French spread their hold over the country, successive Nizams won their friendship without bequeathing their power. The Nizams allied themselves with each side at different times, playing a significant role in the wars involving Tipu Sultan of Mysore, the British and the French. During the reign of the third Nizam, Sikandar Jah, the city of Secunderabad was founded to station French troops and subsequently, British troops.

The British stationed a Resident at Hyderabad and their own troops at Secunderabad, but the state continued to be ruled by the Nizam. Hyderabad, under the Nizams, was the largest princely state in India, with an area larger than England, Scotland and Wales combined. It was considered the "senior-most" princely-state, and within the elaborate protocols of the Raj, its ruler the Nizam was accorded a 21-gun salute. The State had its own currency, mint, railways, and postal system. There was no income tax.