nginx reverse proxy not replacing the application IP

I have an application sitting behind a nginx and obviously not working as desired. So i tried to replicate in my local environment.

Background
The webapplication is running fine on its own and returns a /static/index.html as the default page.
e.g. on accessing http://localhost:7777/ returns /static/index.html and all works fine. {http://localhost:7777/static/index.html}

Problem
When i try to access the same app behind a proxy,it doesn't work. On accessing
http://localhost/app { the localhost is name of the server default in nginx } the app returns as usual /static/index.html and gets rerouted tp http://localhost/static/index.html and returns 404.

Desired situation
Even if the app is behind a proxy, i should be able to see the app. Instead of http://localhost/static/index.html the URL should be similar to http://localhost/localhost:7777/static/index.html

nginx.conf

server {
    listen       80;
    server_name  localhost;

   location / {
        root   /usr/share/nginx/html;
        index  index.html index.htm;
    }

    error_page   500 502 503 504  /50x.html;

    location = /50x.html {
        root   /usr/share/nginx/html;
    }

    location /app/ {
            proxy_pass http://localhost:7777/;
    proxy-redirect off;
            proxy_next_upstream error timeout invalid_header http_500 http_502 http_503 http_504;
            proxy_buffering off;
            client_max_body_size 0;

            proxy_set_header        Host            $host;
            proxy_set_header        X-Real-IP       $remote_addr;
            proxy_set_header        X-Forwarded-For $proxy_add_x_forwarded_for;
            proxy_pass_header       Set-Cookie;
            proxy_pass_header       P3P;
    }

Any ideas how can this be achieved?