The Australian share market has closed below 5000 points after the Reserve Bank held fire on interest rates but said there was scope for a rate cut.

At its first board meeting of the year, the central bank left the cash rate at a record low of two per cent for a tenth straight month but warned that subdued inflation may provide scope for further policy easing.

OptionsXpress analyst Ben LeBrun said the share market sell off on Tuesday morning had accelerated after the RBA decision.

“It appears it has had an impact,” Mr LeBrun said.

“The market has found found a bit of fault with it.

“We lost around 40 points on the ASX200 in the 20 minutes after the decision.”

Mr Le Brun said the market may have been forecasting some dovishness in the RBA’s statement.

He said there had been a decoupling of the local sharemarket and the Shanghai Composite Index.

US futures trade was also trending lower which had affected the local bourse.

The big miners and energy players suffered the heaviest losses after Standard & Poor’s lowered BHP Billiton’s credit rating.

BHP was down 33 cents at $14.92, Rio Tinto lost $1.43 to $38.54 and Fortescue Metals was 8.5 cents lower at $1.59.

Santos was down 13 cents at $2.92 and Woodside Petroleum dropped 91 cents to $27.00.

Financial and telco stocks shed more than one per cent.

ANZ shares lost 19 cents to $24.40, Westpac fell 35 cents to $30.30, Commonwealth Bank dropped 20 cents to $78.02 while National Australia Bank shares bucked the trend to close eight cents higher at $27.91.

Telstra shares fell six cents to $5.61.

KEY FACTS:

* At the close on Tuesday, the benchmark S&P/ASX200 index was 50.3 points, or one per cent, lower at 4,993.3.

* The broader All Ordinaries index was down 50.4 points, or 0.99 per cent, at 5,043.9.

* The March share price index futures contract was 58 points lower at 4,944, with 34,710 contracts traded.

* National turnover was 2.4 billion securities traded worth $5.3 billion.