I would say, go for Tata Zest. It offers the best of both, sedan and hatchback worlds.
1. Great space and Comfort
2. Best VFM
3. Lovely interior and good build quality
4. Only car in it's segment which can seat 5 comfortably
5. That Harmann audio system is lovely.
6. Revotron Turbo-petrol performance is quite good. Provides multi-drive modes
7. Lower cost than Baleno or any other premium hatch.
Also, there are many Zest owners here in TAI
who live in Bangalore; and going by their experience, Tata service there is also quite good.
Regarding mileage, the Tata Zest has achieved a figure of 29kmpl in the efficiency run tests conducted at Ahmednagar. The average speed for the run was around 55kmph. If you are too mileage conscious, you have the Eco mode. Simple.
Baleno is an ugly,stretched version of Swift (personal opinion, no offense) and Polo, although great, is quite low on space. The Swift is just TOO OLD to be recommended at this age, is what I feel.
Other choices; you can have a look at the Tata Bolt, Hyundai Grand i10/Xcent (although the ride isn't great), Ford Figo/Aspire.
If you want something "not compact", the Ciaz is good, although the rear seat won't be too comfy.
The Sunny is a decent car too. Etios has good seats, but terrible interiors and quality.
Try them all and pick one!