DOI: https://doi.org/10.36347/sjebm.2026.v13i06.007

Pages: 303-333

The evidences to support the link between the development and growth rates of stock markets and real economic output in Nepal's frontier economies are extremely scarce. In this study, the role and importance of stock market development and its relationship with the economic growth in the context of Nepal is explored, which serves as a much-needed contribution to the literature of finance-growth relation for the emerging economies in South Asia. The research approach adopted was quantitative research design with secondary-time series data from 2013 to 2024 from Nepal Stock Exchange (NEPSE), Securities Board of Nepal (SEBON), Nepal Rastra Bank and National Economic Survey. Descriptive statistic, Pearson correlation and multiple regression analysis using SPSS software were used to regress five indicators Market Capitalization, Stock Turnover Value, NEPSE Index, Broad Money Supply, and Digitalization in real GDP. The most important factor on GDP growth was digitalization (β = 2.216, p < 0.001), which captures the technology-enabled market participation – as shown in the increasing number of dematerialized accounts – which happened exponentially. The NEPSE Index showed significant positive relationship (β = 2.053, p = 0.025) while Market Capitalization showed significant negative relationship (β = −2.813, p = 0.018). The model explained 98.5% of GDP variance (R² = 0.985). The value of Broad Money Supply and Stock Turnover Value were not stand-alone statistical significance. Based on the study, investments in digital infrastructure and transparency in the market with the help of technology are the most powerful factors for capital market-driven economic growth in Nepal and have significant implications for designing regulations, financial literacy promotion and for short- and long-term development strategy.