Could you recount the incident where Sai Baba seemed to read Laxmichand's mind about his cough and the 'evil eye'?

Certainly. During a Chavadi procession, Sai Baba developed a cough. As Chapter 28 explains, Laxmichand, upon seeing this, privately thought to himself that the cough might be the result of someone's 'evil eye' affecting Baba. This was merely a passing, internal thought. The very next morning, when Laxmichand was at the masjid, he witnessed a startling event. Baba, speaking to Madhavrao but seemingly for Laxmichand's benefit, said, "Yesterday I had much coughing; is this the effect of an evil eye? It seems someone's evil eye has struck me." Hearing Baba articulate his own private thought verbatim filled Laxmichand with wonder, making him question how Baba could know what was in his mind and leading him to the conclusion that Baba dwells in everyone's heart.