Tensions remained high throughout the Kashmir Valley following Monday's shootings when police opened fire on a crowd of several thousand demonstrators just outside Anantnag town south of Srinagar.
Seven protestors were killed and three critically injured.
The demonstrators had been calling for the release of the bodies of five Muslim youths, who they said were innocent victims of a "fake" encounter engineered by the security forces 10 days ago.
The security forces said the five were "foreign" Muslim separatist militants involved in the massacre of 36 Sikh villagers in Kashmir on March 20.
Police and paramilitary forces enforced a curfew in Anantnag for the third day running, as well as three neighbouring townships.
"If things remain calm we may relax curfew for a few hours on Wednesday evening," a police spokesman said.
Other parts of Kashmir were paralysed by continuing strikes to protest the police shootings, while stone-throwing youths fought running battles with security forces in the streets of Srinagar.
Kashmir Chief Minister Farooq Abdullah told reporters Wednesday that Monday's incident could have been prevented.
"The truth will come out in the judicial enquiry to be conducted by a supreme court judge. The guilty will have to face the law," he said, adding that three senior Anantnag district officials had been transferred and 20 police involved in the shooting suspended from duty with immediate effect.
"What has happened could have been avoided. They (police) could have fired in the air or used tear gas canisters to avoid casualities."
A senior state leader of Prime Minister Atal Behari Vajpayee's Hindu-nationalist BJP party, Rashid Kabli, demanded the chief minister's resignation. "Abdullah has no moral right to stay in power as he has completely failed to protect the life and property of the people," he said.