You need to provide much more information. How is the instance of SQL Server called? Did you install it as a SqlExpress instance? If so, did you try Gaurav\SqlExpress
Also, take a look at other SqlExpress connection strings If by "new database in application data" you are referring to the App_Data folder, you need a different connection string that uses the AttachDBFileName attribute.
Take a look at the following URLs for a better understanding of SQL Server security and connection strings:
P.S. Hopefully this code snippet is just an example. Usually it's considered a bad practice to embed connection strings in your code directly. For some better ideas: http://imar.spaanjaars.com/QuickDocId.aspx?quickdoc=250
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