The shortest way would probably be to use the fileinput module. For example, the following adds line numbers to a file, in-place:

import fileinput

for line in fileinput.input("test.txt", inplace=True):
    print('{} {}'.format(fileinput.filelineno(), line), end='') # for Python 3
    # print "%d: %s" % (fileinput.filelineno(), line), # for Python 2

What happens here is:

1. The original file is moved to a backup file
2. The standard output is redirected to the original file within the loop
3. Thus any print statements write back into the original file

fileinput has more bells and whistles. For example, it can be used to automatically operate on all files in sys.args[1:], without your having to iterate over them explicitly. Starting with Python 3.2 it also provides a convenient context manager for use in a with statement.

While fileinput is great for throwaway scripts, I would be wary of using it in real code because admittedly it's not very readable or familiar. In real (production) code it's worthwhile to spend just a few more lines of code to make the process explicit and thus make the code readable.

There are two options:

1. The file is not overly large, and you can just read it wholly to memory. Then close the file, reopen it in writing mode and write the modified contents back.
2. The file is too large to be stored in memory; you can move it over to a temporary file and open that, reading it line by line, writing back into the original file. Note that this requires twice the storage.

You opened the file with 'w', meaning you are going to write to it. Then you try to read from it. So error.

Try reading from that file, and open another file for writing your output. If needed, when done, delete the first file and rename your output (temp) file to the first file's name.

with open("Stud.txt", "rt") as fin:
    with open("out.txt", "wt") as fout:
        for line in fin:
            fout.write(line.replace('A', 'Orange'))

some notes:

1. string.replace and re.sub are not in-place so you should be assigning the return value back to your variable.
2. glob.glob is better for finding files in a directory matching a defined pattern...
3. maybe you should be checking if the directory already exists before creating it (I just assumed this, this could not be your desired behavior)
4. the with statement takes care of closing the file in a safe way. if you don't want to use it you have to use try finally.
5. in your example you where forgetting to put the sufix *.clean ;)
6. you where not actually writing the files, you could do it like i did in my example or use fileinput module (which until today i did not know)

here's my example:

import re
import os
import glob

source_dir=os.getcwd()
target_dir="clean"
source_files = [fname for fname in glob.glob(os.path.join(source_dir,"*.seq"))]

# check if target directory exists... if not, create it.
if not os.path.exists(target_dir):
    os.makedirs(target_dir)

for source_file in source_files:
   target_file = os.path.join(target_dir,os.path.basename(source_file)+".clean")
   with open(source_file,'r') as sfile:
      with open(target_file,'w') as tfile:
         lines = sfile.readlines()
         # do the replacement in the second line.
         # (remember that arrays are zero indexed)
         lines[1]=re.sub("K|Y|W|M|R|S",'N',lines[1])
         tfile.writelines(lines)

print "DONE"

hope it helps.

I realized that I was wrong by just an indentation. In the code piece 1 mentioned in the question, if I am bringing the 'print line,' from the scope of if i.e. if i outdent it, then this is solved...

As this line was inside the scope of if, hence, only this new_text was being written to the file, and other lines were not being written, and hence the file was left with only the new_text. So, the code piece should be as follow :-

text = "mov9 = "   # if any line contains this text, I want to modify the whole line.
new_text = "mov9 = Alice in Wonderland"
x = fileinput.input(files="C:\Users\Admin\Desktop\DeletedMovies.txt", inplace=1)
for line in x:
    if text in line:
        line = new_text
    print line,
x.close()

Also, the second solution given by Rolf of Saxony & the first solution by Padraic Cunningham is somehow similar.