Hi Dhruv,
Thank you for writing to AlterHeros. It sounds like you are asking whether it is normal for your penis to get erect when you are talking about sex. You are also asking about the clear liquid that comes out of your penis while it is losing its erection.
The penis is made of erectile tissue that is stimulated to increase and retain blood flow when a person is aroused. This reaction, which can happen sometimes in response to sexual stimulation or thoughts, but also in response to nervousness or anxiety, is completely normal and is something almost all males experience.
The clear liquid is most likely pre-ejaculatory fluid, more commonly known as pre-cum. It is produced in order to clean out the urethra of urine or other matter, in preparation for ejaculation. Pre-cum can appear when someone with a penis is approaching orgasm; however, your description of it appearing as your penis returns to a flaccid state is very plausible, since the penis shrinks back to its original size and hangs downwards, allowing the pre-cum to leave the urethra. This is completely normal, and nothing to worry about.
Hope this helps, and please feel free to write back if you have any more questions.
Lauren, for AlterHeros