Konsole was one of the few terminal emulators with proper complex text shaping support. Unfortunately, complex text (including Malayalam) shaping was broken around KDE Applications release 18.08 (see upstream bug 401094 for details).
Mariusz Glebocki fixed the code in January this year which I tested to work correctly. There’s a minor issue of glyphs with deep vertical components being cut-off (notice rendering of “സ്കൂ”), but otherwise the shaping and rendering is good. The patches are also merged upstream and will be part of the KDE Applications Bundle 20.08.
If you don’t want to wait that long, I have made a 20.04 release with the fixes on top available for Fedora 31 & 32 in this COPR.