Christopher Columbus referred to the indigenous peoples he encountered in the Americas as "Indians" because he mistakenly believed he had reached the East Indies (the region of South and Southeast Asia) while searching for a westward route to Asia. His voyages were aimed at finding a shorter path to the riches of the Indies, and upon landing in the Americas, he assumed he had arrived in that area. Therefore, the correct response is:
He mistakenly assumed he was in the Indies.