In this paper, a new efficient algorithm is developed for optimal placement of capacitor using Nelder-Mead particle swarm optimisation (NM-PSO). The developed capacitor placement problem (CPP) has been formulated to make the objective function (i.e., planning method) more realistic by incorporating essential economic factors, viz., maintenance cost, interest on investment cost and inflation. This developed CPP is found capable of providing more cost-effective solution than existing approaches. Simulation results are obtained for IEEE 9-bus and 69-bus radial distribution system. Results obtained with NM-PSO, are compared with the PSO approach. For both the IEEE test systems, simulation results reveal more effective and profitable planning with NM-PSO. In addition, sensitivity analysis is carried out to highlight the impact of newly incorporated economic factors, justifying their inclusion in CPP.