India needed to bat out the last day of the second Test, which will be remembered for umpriging follies and ugly gamesmanship, to bag a much deserved draw. But Indian batting collapsed and the team was shot out with just eight minutes to go.
Describing the Sydney defeat as the lowest point of the series, Kumble said, "We lost pretty badly in Melbourne. We did exceptionally well in Sydney. Wish we could hang around for another eight minutes to save the match. We came so close to it."
With the win in Sydney, Australia took a 2-0 lead in the four-match series to ensure that they retain the Border-Gavaskar trophy.
Indian skipper Anil Kumble showered praise on his teammates and told India has the wherewithal to challenge any team in the world.
"We have stepped up to their level. That is the quality we have," Kumble told reporters.
Kumble, who almost certainly making their last appearance on Australian soil along with Sachin Tendulkar, Rahul Dravid, Saurav Ganguly and VVS Laxman, predicted a bright future for the team with the emergence of young talent.
"Looking at the talent that was available, with a young lot stepping up to the plate here in the series, and also the future we have with the young players back home, it certainly augers well," he said.
"We didn't come with our full strength fast bowling attack and then we lost our main fast bowler, Zaheer (Khan), after the first Test.
"The way the young fast bowling unit responded was fantastic, RP Singh led the attack, Irfan (Pathan) came in, bowled beautifully, Ishant (Sharma) was probably the find of the series.
"For a 19-year-old, first series in Australia, his attitude and aggression right throughout and the way he troubled every batsman was fantastic."
Even though India have not won a series in Australia, Kumble believe it was only a matter of time.
"The next Indian team will certainly look back at our performances here and be proud that they can surely come here and win a Test series here," he said.
"The Aussies played really well and credit should be given to them.
"I am proud of how we played, in the last five years it is only India that has won two test matches and competed against Australia here, it goes to show what we are capable of."