Thanks Craig. Actually I wasn't able to create a file with a dot infront of it. I guess it's a limitation with Windows Explorer. I was able to create the .nshrc with simple echo command.
echo jython.path=C:\Jython\Lib;C:\Jython\Lib\JLI > .nshrc
The file can be named nshrc and then be renamed to .nshrc using DOS ren command.
The .nshrc should be located in the user home directory %USERPROFILE%