For pensioners, I think the best options out there include FDs and a few debt based mutual funds. FDs with nationalized banks gives around 9% now (check it yourself) + 0.5% for senior citizens... these will give piece of mind. Plus postoffice savings gives, if I remember right, 8% compounded annually. Try Kisan vikas patra (Money doubles in 8 years & 7 months), NSCs, Senior citizen savings funds etc. These are the safest out there:
http://www.indiapost.gov.in/netscape/Banking.html
Never go with private companies, even though, my parents have investments with Shriram transport since last 15 years or so and they are relatively safe out there... but not beyond say, 20k. Check out their latest Unnati scheme, only if he is comfortable.
Other option is debt mutual funds that are actively managed.. like I have SIP in Canara Robeco income. These are also safe in the long run, but, when RBI raises interest rates, their returns go down for short term.
check out:
http://new.valueresearchonline.com/...Year&Percentage=0.1&rating5=5&Submit=Get+Data
I would also suggest may ~5% in gold ETFs, only if he is comfortable. The closest he can come into equity would be balanced funds like HDFC prudence or balanced.
A big NO to mid&small caps, sectoral funds or stocks.