Malayalam Cinema has the best in all the categories of film making. Films, Directors, Actors, and all other disciplines of cinema. Since this is about the actresses, let me give you my choice.
Urvashi. Is there need to disagree. If you take the best performers among males and females, even then Urvashi would be at the top, not only in Malayalam Cinema, but Indian cinema on the whole. Look at the variety of her roles and the consistency of her performance. She has never been repetetive and she brings about a different feel to the character she plays. Even mediocre films have been termed as good just because she was a part of it. I do not want to mention any films of her because that would be an insult to her. She has performed excellently in all of her films and that is a hallmark of a great and talented artist.
Sukumari. Another versatile actress, even at this age, she can convincingly perform all kinds of roles except romancing the heroes. At times she can be so bad that you love to hate her and at times she is so good that you feel to give her a helping hand. She has shown that age is no bar to reach heights in whichever field you are.
KPAC Lalitha. If Sukumari is mentioned then undoubtedly Lalitha is not to be left behind. She has been a pillar of many films. It is because of actresses of the kind of KPAC Lalitha that good films are still being made. She brings honesty and realness to the characters that she plays which force film makers to make quality films to cast her.
Geeta. For an actress who could not speak Malayalam, she was wonderful. She has carved a niche for herself in the Malayalam Film Industry. She did roles with elan and she matched histronics with her male stars. She is one of the rare actresses who was willing to experiment with her roles without bothering about her image. If one watches her films, you would be dumbstruck with how she makes complex roles look so simple.
Sarada. She is a veteran in films and young people like me cannot comment on her performance. What one can do is just watch her movies and think how she managed to give such splendid performances.
There may be many who may not agree with my list, but each one has their own view and I assure you that I have made this list without any prejudice or partiality. Though I wanted one of my favourites, Shobana, to be in the list I could not accomodate her as I felt the people who deserve should be mentioned.