URL Rewrite is not working in Nginx

Question

URL rewrite is not working in Nginx and operating system is Ubuntu 12.4 Lts

when open http://mvc.loc it is working but when i try to open http://mvc.loc/login Not working

404 Not Found

nginx/1.1.19

.htaccess

<IfModule !mod_rewrite.c>
    ErrorDocument 500 "mod_rewrite must be enabled"
</IfModule>
RewriteEngine on
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule ^(.*)$ /index.php?u=$1

virtual hosts for mvc.loc

server {
    listen 80;
    server_name mvc.loc;
    access_log /var/log/nginx/mvc.loc.access.log;
    error_log /var/log/nginx/mvc.loc.error.log;
    root /usr/share/nginx/www/mvc;

    index       index.php;


    # use fastcgi for all php files
    # Are you sure you have this set up?
    location ~ \.php$ {
        fastcgi_pass 127.0.0.1:9000;
        fastcgi_index index.php;
        fastcgi_param SCRIPT_FILENAME $document_root$fastcgi_script_name;
        include fastcgi_params;
    }

    # deny access to apache .htaccess files
    location ~ /\.ht {
     deny all;
    }

}

Answer 1

location / {    
   rewrite ^(.*)$ /index.php?u=$1 last;
}

Answer 2

Well @NanheKumar's answer got the rewrite correct but it ignored the first 2 rules in the htaccess

RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d

This means check if the request doesn't match a file and doesn't match a directory, to imitate this exact behavior you can use try_files like this

location / {
    try_files $uri $uri/ /index.php?u=$request_uri;
}

This will make sure to serve requests that point to an asset or a directory directly first then if neither it would pass the request to index.php

EDIT: unless index.php is able to serve assets, this will cause all assets ( images, css, javascript, etc ) to show errors because index.php will be receiving arguments it's not expecting. Think about something like this http://example.com/index.php?u=/images/background.jpg