Actually, Malayalees don’t observe Deepavali. They celebrate Onam in Kerala.
Generally, there’s no reason for south Indians to celebrate Deepavali.
Apparently, the story of Deepavali is the story of a North Indian King defeating a South Indian King in battle. I believe the southerner ran off with the northerner’s wife. HiHiHi . . . what’s HaHaHa?
The victory of the North Indian King is seen as the triumph of good over evil, light over darkness bla bla bla.
I don’t know whether the people in South India celebrate Deepavali.
Probably they do.