You are looking for a safe investment, want reasonable returns and have a choice of equity or mutual funds for a medium term.
Medium-term can be anywhere between 5-7 years. We should realize that equity and mutual funds are not entirely risk-free. Every 8 years, the Indian market has seen a drastic fall (1992,2000,2008). By the end of 2017, a major drop was anticipated by some but it didn't happen. So, if your investment is caught at such odd times when you want to encash, then you need to be prepared to accept a loss or hold on for a longer time. In your case equity would not be feasible, unless you can monitor it.
If you are not prepared to take any major risks, then you have to look at bonds, PPF etc, these instruments yield less but the risks would be minimal.
If you are willing the take a little risk, then you can opt for hybrid mutual funds or debt based MFs.Here anywhere from 16-30% is invested in equity and the rest in debt options(bonds, deposits, and securities). In simple terms, debt MF is better than fixed deposits for people who are not willing to take a medium or high risk.
You can check from (http://www.moneycontrol.com/mutual-funds/best-funds/hybrid.html)
If you want the money back in say 2023-2024, for a mandatory commitment which you have to honor at the end of the investment period, it would be safer to encash a few months earlier and keep it safe because one can never predict the market. If the market drops significantly it would reflect on the NAV of the mutual fund, the next day.