Nginx causes redirects when server root is changed
===

My nginx version is :
root@v-enterprise15:/etc/nginx/conf.d# nginx -v
nginx: nginx version: nginx/1.0.5

My application is installed at 
/usr/share/nginx/www/magento/current

When I access
http://{my_server}:81/magento/current/index.php
it works fine. This is because the server root is set to /usr/share/nginx/www;

Now I want to acces the app using http://{myserver}:81/index.php.
When I change the server root to /usr/share/nginx/www/magento/current and type the above URL, it REDIRECTS with http 302 to 
http://{my_server}:81/magento/current. 
What might be the reason for this?

It then applies other rules from my .conf and gives a 404.

I see this in the access log:
[31/Jul/2012:11:19:23 +0530] "GET /index.php HTTP/1.1" 302 5 "-" "Opera/9.80 (Windows NT 6.1; U; en) Presto/2.10.229 Version/11.64"

My .conf file is:
    server {
        listen 81 default;
    ## SSL directives might go here
        server_name {my_server};
        #root /usr/share/nginx/www;
        root /usr/share/nginx/www/magento/current;
        error_log /var/log/nginx.error.log notice;
        access_log /var/log/nginx.access.log ;
        
        rewrite_log on;

        
        location / {
            auth_basic           "Restricted"; ## Message shown in login window
            auth_basic_user_file htpasswd; ## See /etc/nginx/htpassword
            index index.html index.php; ## Allow a static html file to be shown first
            try_files $uri $uri/ @magehandler; ## If missing pass the URI to Magento's front handler
            #try_files $uri $uri/ ; ## If missing pass the URI to Magento's front handler
            #expires 30d; ## Assume all files are cachable
        }

        
        location ^~  /. { ## Disable .htaccess and other hidden files
            return 404;
        }

        location @magehandler { ## Magento uses a common front handler
            #rewrite / /index.php;
            rewrite ^(.*) index.php$1 last;
        }

        #The more-specific regex are at the top.
        #The regex's are evaluated in the order in which they appear.
        location ~ .php$ { ## Execute PHP scripts
            #if (!-e $request_filename) { rewrite / /index.php last; } ## Catch 404s that try_files miss
                proxy_read_timeout 120;
                proxy_connect_timeout 120;
            expires        off; ## Do not cache dynamic content
            fastcgi_pass   127.0.0.1:9000;
            #fastcgi_param  HTTPS $fastcgi_https;
            fastcgi_param  SCRIPT_FILENAME  $document_root$fastcgi_script_name;
            fastcgi_param  MAGE_RUN_CODE default; ## Store code is defined in administration > Configuration > Manage Stores
            fastcgi_param  MAGE_RUN_TYPE store;
            include        fastcgi_params; ## See /etc/nginx/fastcgi_params
        }
        location ~ /(media|skin|js)/ { }
        location ~ /(tag|admin|customer|wishlist|checkout|catalog|app).*$ { #store URL
                rewrite /(.*)$ /index.php/$1 last;
        }
        
        location ~ /[a-zA-Z]+$ { #store URL
                rewrite ^/([a-zA-Z]+) ?store=$1 last;
        }
        location ~ /[a-zA-Z]+/ { #store URL
                rewrite ^/([a-zA-Z]+)(.*) /$2?store=$1 last;
        }

