A poor clearance found its way to Deeney, who hooked the ball on to Gray to run on to and fire through Schmeichel's legs.
While admitting his side needs to learn lessons from the nature of their defeat, Rodgers remains upbeat about what they can achieve.
The game reverted to its first-half state as Leicester enjoyed plenty of possession but still did not do much with it and it looked hard to see how they were going to get back into the game.
"We passed the ball well and opened up the game, you felt Watford were getting deeper and opportunities were coming and then the goal at the end, it's a case of managing the game".
"We don't have the references we have with other coaches and other teams, but the most important thing is to be concentrated on ourselves and on our work".
Watford manager Javi Gracia, meanwhile, praised Gray for his match-winning impact from the bench.
Raided Couple’s home near Glasgow
However, Watford found the winning goal in the second minute of time added on Andre Grey raced clear on goal slot past Kasper Schmeichel.
"I am demanding with myself and I always have a lot of doubts about the players because all of them deserve to play".
The club are in the semi-finals of the Scottish Cup, and have already won the League Cup.
This has been done, too, with a serious shortage of players throughout the campaign thanks to various injuries and Griffiths himself has been missing for much of the campaign.
Rodgers bailed on the Scottish champions last week after Leicester came calling following the sacking of Claude Puel.
"I took them up, we couldn't stay up and I was never going to be afforded the time if I couldn't bring them back up that season. Who knows what can happen in the future?"