The Lumia 535 touchscreen problem is quite notable problem in Lumia smartphone line from Microsoft. Since I have this smartphone (Lumia 535 Dual SIM) I also acknowledge this problem.
Short answer is: you can't really do anything about it. I have tried to update the phone, and even install Windows 10 Mobile Preview for it, of course with no avail. This is because the problem is lies with the hardware, not the driver nor software. This problem is acknowledged from 2014 by Microsoft, but until 2016 there is no definitive fix which able to fix that problem completely for all user.
More info: You can read the official FAQ from Microsoft for this problem:
What to do if issues with the touch screen on my Lumia 535 and 535 Dual SIM phones?
The Lumia 535 and Lumia 535 Dual SIM display has a different behaviour to other Lumia phones in the following respect:
- You cannot zoom while taking a picture.
- Fingers should be more than 20mm apart to pinch or zoom when browsing websites or viewing pictures.
The software update released in December 2014 brought some improvements to the touch sensitivity, but if you still have problems with the touch screen, or the display is not working properly, please check the following:
- Check that there's no water drops or moisture on the touch panel. Wipe out the water drops and moisture to get the touch panel to function normally.
- When typing on the keyboard, take care that you tap the center of the key. Otherwise a wrong key may get pressed if typing too fast.
- If the screen gets magnified or zoomed when typing, check if the Screen Magnifier is enabled. You can turn the feature on and off in Settings > Ease of access > Screen Magnifier.
- When charging, use the original charger coming with the phone. The touch screen may perform poorly if charging with an 3rd party charger that is not compatible with the phone.
- Check also that all the phone updates have been installed (Settings > Phone update > Check for updates).
Source: FAQ - What to do if issues with the touch screen on my Lumia 535 and 535 Dual SIM phones?