I want to invest in mutual fund through SIP of Rs. 1000 per month. Which mutual fund is better for me?

Your question is related to monthly SIPs. I have given some specifics below, but before that I am purposely trying give you a broader understanding of how to go about - making your money work best for you:-)

There is nothing like starting early, in your investing life and use the power of compounding to your advantage. To understand power of compounding, consider this excellent article at http://www.valueresearchonline.com/story/h2_storyView.asp?str=4007

Next, you can invest in a mix of the following strategies, depending on your investing risk profile, as indicated below. Invest only those funds that you do not need. Use these funds to invest wisely. You need to remain invested for the long term, since you want capital growth.

Conservative Risk Profile (you seem to be of this type; someone who wants his principle to be secure and is looking for a decent growth over the long term)

1. PPF (Public Provident Fund) - account can be opened with any State Bank of India branch. This gives you a compounded 8% return per year, is currently tax free, and is the safest instrument available. Invest 50% of sparable funds in that

2. A Balance fund like HDFC Prudence Fund - This Mutual Fund invests in both equity (65%) and debt (35%) instruments. This is one of the safest funds with a great track record of over 14 years, and has been giving a compounding return of around 20-25% per year. This fund has one important virtue: it manages to lose less than the category average in periods of downside. Couple this with its tendency to top charts & you get a safe & sure fund in HDFC Prudence. Invest 30% of the funds in HDPC Prudence.
check out HDFC Prudence fund analysis at
http://www.valueresearchonline.com/funds/fundanalysis.asp?schemecode=600

3. Equity Diversified MF -like SBI Magnum Contra, Reliance Growth.
These are funds having a very good long term record in delivering great returns with low to average risk. They have figured among the top fund ratings for a very long time. Invest the balance 20% in funds like these
Check out more on the top rated funds at http://www.valueresearchonline.com/toprated.asp

Moderate Risk Profile (someone who can take a little more risk with some of his money)
PPF -40%; HDFC Prudence -30%; SBI Contra or Reliance Growth fund -30%

Aggressive Risk Profile (someone who can take higher risks with some of his money)
PPF-20%; HDFC Prudence -30%; SBI Contra or Reliance Growth - 50%