* FTSE down for second day as Cyprus worries weigh
* Miners lead market lower
By Sudip Kar-Gupta
LONDON, March 19 (Reuters) - Britain's benchmark share index fell for a second consecutive session on Tuesday as worries over a Cyprus bailout deal hurt sentiment, while major mining stocks slipped after a broker downgrade.
Traders were divided over whether to sell the market on anticipation that the Cyprus situation may worsen and affect other euro zone states, or buy equities on expectations that the Cyprus problems would soon be resolved.
Cyprus's parliament was set to reject a divisive tax on bank deposits in a vote scheduled for Tuesday, a government spokesman said, in a move that would push the island closer to a default and banking collapse.
Britain's major banks have substantial exposure to the euro zone and the FTSE 350 banking index was down 0.4 pct after a 1.3 percent slide on Monday.
Hartmann Capital trader Basil Petrides said he had a "short" position out on the market at present, namely betting on further falls, although he admitted that equity markets had so far held up quite well in light of the Cyprus hit.
"I'm 'short' right now. I'm looking for a bit of a corrective phase although it doesn't seem to be happening, but the Cyprus situation could really escalate," he said.
A Goldman Sachs (NYSE: GS-PB - news) downgrade to major mining stocks also weighed on the FTSE 100, with the FTSE 350 mining sector falling 2.7 percent, while miner Fresnillo also fell after Deutsche Bank (Xetra: 514000 - news) cut the stock to "sell" from "hold".
Goldman Sachs cut its rating on miner Rio Tinto to "sell" from "neutral" and BHP Billiton to "neutral" from "buy", while executives from top miners themselves warned of softer prices as growth in China's steel production slows.
"In line with our forecast of falling iron ore prices, we see minimal free cash flow and significant earnings declines," Goldman wrote in a research note on Rio.
Toby Campbell-Gray, head of trading at Tavira Securities, expected equity markets to tail off towards the end of the first quarter, with the FTSE 100 having risen nearly 10 percent since the start of 2013.
However, he added that equities remained the best place for investors to park money, given lower returns elsewhere in bonds and cash.
"I do think that the markets will check a bit at the end of Q1, but there is still a lot of value in the equity space," he said. (Editing by Susan Fenton)