You should pick soft triquetrous pencils for a small kid. It is sufficient to have a set of six basic colors. When coloring, try pronouncing the name of each color, this helps the baby to remember them.
Coloring helps the child to learn how to control the scale of his hand. Please note that when the baby is just started to draw he does not monitor the boundaries of the sheet, and the picture is not painted on the outlines, and even beyond.