Coming from Hindi background, I understand what you mean here.
I agree that for words commonly used (like “Mobile”, “Login”) you can just translate that as is in Malayalam script. But for typical words (like “Categories”, “About”) you should try to translate that to pure Malayalam language if possible.
I believe a good starting point will be to look at what other Malayalam sites are doing. (For example: Facebook in Malayalam language.)
I also granted you Reviewer rights for Malayalam language on Transifex.