How to find smallcap proxy stocks in this market

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PE (price-to-earnings) multiples. The stock is quite a distance from its previous peak and closer to its 52-week low. You could blame this underperformance on the rising competition in the paint sector, especially with the entry of Grasim, that expects to generate ₹100 bn in gross revenue in three years.

And it's not just one challenger. In recent years, some big names like Pidilite and JSW group have entered the segment. While consumers are spoilt for choice, leading incumbents have reasons to be nervous.

But there are also some entities benefitting from these developments. Consider Moldtek Packaging, a market leader in rigid plastic packaging. The company takes care of the packaging needs of leading companies in the paint sector, among others like lubricants, food and FMCG and soon pharma.

It makes plastic containers in which the product is sold. Asian Paints has been one of its biggest clients. Let's now see what the entry of Grasim means for this proxy play.

Moldtek has already set up two plants and will be coming up with the third one to supply packs for Grasim paints. While the paint companies can fret over market shares, irrespective of who gains or loses, this smallcap company is an undisputed beneficiary of the rising competition. And that's the beauty of smallcap proxy plays.

A similar phenomenon is playing out in the auto sector as well. In FY20 alone, Maruti Suzuki used to command a share of about 51%. In FY24, that share has come down to 41%.

Companies like Kia, Volkswagen, Toyota, MG have made significant inroads in the domestic market. While the competition is heating up in the auto OEM market, it's an opportunity for auto ancillary companies. These are the companies that supply auto parts to leading auto