How to set Default value in autocomplete implemented textbox?

Change your following line

 $('#txtcity').val() = item.value;

to

 $('#txtcity').val(item.text);

you can set the value like this after initializing Autocomplete:

$( "#txtcity" ).autocomplete({
  // do whatever
}).val('Banana').data('autocomplete')._trigger('select');

Updated Example: http://jsfiddle.net/55jhx/1/