Public buses went off the roads in Srinagar but private vehicles as well as autorickshaws continued to ply although in fewer numbers, residents and officials said.
Security was tight in this summer capital of Jammu and Kashmir as Modi prepared to reach the city after a visit to Siachen Glacier, the world's highest battlefield.
Most shops and businesses were shut in Srinagar, the urban hub of a dragging separatist campaign that has claimed thousands of lives in Jammu and Kashmir since 1989.
Police and paramilitary personnel were deployed in visibly large numbers all across Srinagar.
Motorists were asked to show identity papers and pedestrians were frisked at random.
Separatist leader Syed Ali Shah Geelani accused Modi of rubbing "salt on our wounds" by visiting Kashmir on Diwali but not extending Eid greetings to Kashmiri Muslims.
Jammu and Kashmir Liberation Front (JKLF) leader Yasin Malik said Modi was "politicising a human tragedy" -- a reference to the prime minister's planned meetings with victims of the recent floods in the valley.