well it is really difficult to choose a car in this budget...also everyone has his own experience and suggestions so it makes things even more difficult...
so here goes my suggestion...
the thing is ... if you buy a Mehran, Coure, Alto, Santro - you'll never be happy with the comfort, a/c, drive, and space.
as far as i m concerned i like big cars so i would suggest any big car in this budget from 1300 cc onwards.
A friend of mine has the same budget (actually Rs. 100,000 less than yours) and everyone was suggesting him a small car but he bought a Kia Spectra 2001 model and he is quite happy with his purchase (though he has spend around Rs. 50,000 for tyres, brakes, tuneups and touch-ups). According to him the car in no means can be compared to a Mehran, Coure, Alto or Santro. The comfort, drive, space, speed, is way way better than these small cars.
So decision is yours but go for the car which your heart suggests...cause in the end its you who is gonna drive it and sometimes if you buy something for the sake of people you'll never get satisfied.