Heat oil in a pan and add coconut. Fry the coconut till it turns a darker shade of brown. Make sure you stir it continuously. Remove it from fire and add all masala powders (chilli, coriander & turmeric). Bring back to fire and cook for a min. Remove from fire and let it cool completely.
Grind the coconut without water to a smooth paste. The oil from coconut will be released while grinding and the paste will be liquidy.
Soak tamarind in 1/4 cup of warm water and keep aside.
Heat oil and add the sliced onion and curry leaves. Cook till the onion begins to brown. Add coconut paste, soaked tamarind and salt. Mix well. Add half cup hot water. Bring it to boil. Reduce flame to lowest and cook for 4-5 mins. Remove from fire.
Heat oil in a pan and crackle mustard seeds and fenugreek seeds. Add this to theeyal. Serve with rice.