Australian stocks have closed lower for a second straight day after giving up early gains during afternoon trading.

The benchmark S&P/ASX200 index was down 28 points, or 0.56 per cent, at 4,987.4 points, the broader All Ordinaries index was down 23 points, or 0.46 per cent, at 5,004.4 points.

The local market began the day on a bright note and was up about 0.75 per cent at noon, as investors clawed back losses from Monday when Australian stocks posted their largest one day fall so far in 2013.

Lonsec senior client adviser Michael Heffernan said the rally came as market players reassessed the impact of Cyprus’ proposed savings levy as part of the nation’s bailout package with the European Union.

But the rally petered out and stocks headed south after comments from the Reserve Bank of Australia (RBA) suggested the central bank may be finished cutting rates.

‘‘When you look at the Asian markets they are all up pretty nicely today, it is only us that is giving the game up,’’ Mr Heffernan said.

‘‘When you weigh up the international and domestic scales, the domestic scales have pushed us down.’’

The minutes of the RBA’s March board meeting, released on Tuesday, said interest rate sensitive parts of the economy continued to show signs of responding to recent rate cuts.

‘‘It was likely that this still had further to run, though the exchange rate remained high,’’ the minutes said.

Separately, RBA deputy governor Philip Lowe said lower interest rates were ‘‘doing their work broadly as expected’’, citing higher house prices, as well as improved auction clearance rates in recent months.

The RBA has held the cash rate at three per cent at its past two monthly meetings, having delivered 1.75 percentage points of interest rate cuts since November 2011.

Consumer staples was the worst-performing sector on Tuesday, falling 2.15 per cent.

Woolworths was down 90 cents at $33.85, while Coles owner Wesfarmers was $1.01 lower at $41.09.

Among the big miners, BHP eased 14 cents to $34.55 and Rio slipped 89 cents to $58.66.

AAP