On Wednesday, thousands of demonstrators burnt tyres in the streets and attacked shops, some of them owned by Indians.
Dozens of people have been injured in clashes between student protesters and the police which have continued for a third consecutive day.
Kathmandu's streets were deserted, and shops and restaurants closed in protest against the Bollywood heart-throb Hrithik Roshan, who is alleged to have made derogatory remarks about Nepal in a television interview.
Mr Roshan is accused of saying he hated Nepal and its people.
He has denied he made the remarks, and said he wanted to tell the Nepalese people that he loved them.
He told the BBC he would not apologise for something he had not done, but was upset at the violence.
On Wednesday, thousands of demonstrators burnt tyres in the streets and attacked shops, some of them owned by Indians.
Cinemas and cable operators have stopped screening Hindi films while the Government of Nepal appealed for calm.
The police fired tear gas and charged the protesters with batons to stop them from proceeding towards the Indian embassy.
Indian concern
The Indian Government has reacted strongly against the violence and said the protests were carefully orchestrated "by elements inimical to Indo-Nepalese friendship to create an atmosphere of hatred and distrust".
The foreign office in Delhi summoned the charge d'affaires of the Nepalese embassy to express its concern.
And Indian Prime Minister Atal Behari Vajpayee has spoken to his Nepalese counterpart, Girija Prasad Koirala, over the matter.
The Bollywood star said he was completely baffled by the controversy.
"I have never spoken against Nepal and why should I? I love the Nepalese people just as much as I love the Indian people," he said.
Hrithik Roshan's hit film, Kaho Na Pyar Hai (Say You Love Me), ran for weeks in many cinemas this year.
Hindi films and Bollywood stars are very popular in Nepal, but some of them have been embroiled in controversy in recent years.
Last year, actress Madhuri Dixit apologised after an uproar over her remarks that Nepal was a part of India.
Following similar protests 30 years ago, the films of the then superstar, Dharmendra, were banned in Nepal and they are still not screened.