"They were unlucky to lose the series against Australia," Laxman said.
"The players are hurt but the defeat is not going to affect the team's morale," he added.
The stylish right-hander said Mahendra Singh Dhoni's men would be striving to achieve the No 1 Test ranking by beating the Lankans in the three-Test series starting November 16.
"The team is targetting the No 1 spot in Test rankings and has a very good chance of reaching there if we win the series against Sri Lanka," he said.
However, he said the task would not be easy as the visitors have a balanced side.
"The Sri Lankans are a better-prepared side now and can give the Indians a tough time during the series," he told a television channel.
Speaking about India's performance in the ongoing seven-match ODI series against an injury-ravaged Australia, which the hosts trail 2-4, Laxman rejected suggestions that skipper Mahendra Singh Dhoni's leadership is at fault.
"Dhoni is an excellent captain and bit of luck can turn the things around," he said.
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