Pep Guardiola says Leicester's gameplan led Manchester City players to believe they weren't playing well in the first half, leading to them being picked off on the counter-attack.
Riyad Mahrez gave the Blues the perfect start in their third game of the week and season as he rocketed in a loose ball in the box to put them ahead in the fourth minute of the game.
However, despite dominating possession in the first half the hosts were unable to add to their score. After threatening a few times on the counter-attack, Leicester earned a penalty before the break when Jamie Vardy got on the wrong side of Kyle Walker in the penalty area and picked himself up to level the scores.
Guardiola made an attacking substitution early in the second half by bringing on forward Liam Delap for Fernandinho to give his team more presence in the box, but the home team were then ripped apart as Leicester score four more goals including another two penalties.
City's manager reckons his players lost confidence in the first half as the visitors squeezed the space on the pitch, and then were left so rocked by Leicester's counter-punching that they were unable to respond in the game.
"We played really good in the first 30 minutes," said Guardiola. "We scored early on and I think they defended so deep, so it was not easy.
"In this situation it happened many times so we have to control the counter-attack and I think today the problem was that we put extra pressure on ourselves to score the second or third one when they just didn’t want to play, they just wanted to defend and play on the counter attack.
"In that position we have to be more calm. We were anxious to attack and say we are not creating chances, we got nervous and after we gave three penalties away. And when you do that you cannot [win the game].
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"After 1-1 and 2-1 we were not strong enough to be stable, to be patient and settled. With their two [ranks of] fives they settled back there and it is so difficult to create chances, it is so difficult.
“It has happened in the past in our four years together that we were calm and patient, to move them, to run, and in the moment to find a solution. Because in these games we didn’t win three or four or five, we won 1-0 or 0-1 or 1-2 – short margins.
"Today the consequence was more the fact we gave them three penalties and after that it is more difficult to win, and the fourth from Maddison was exceptional. But especially when we started to think we are playing badly when we are not playing badly.