I have this graphite Daiwa rod and noticed the protective plastic "coating" has started to peel in this particular spot. Is there something I can apply to this area to stop it?

You may get better responses from some pro builders on the site, but here is my take.  Obviously the finish is separating from the rod.  It may or may not spread, but the best idea I have is to carefully remove only the finish that has separated, (a small, new, hobby tool blade will work, cut it off) then refinish the spot with just a little overlap of the unseparated finish.  The right product for finishing rods is Lumiseal or U40 Permagloss, available from rod building sites.  However, since we don't know what the finish on the rod is, it is risky to use these products as they are very "hot," and will mess up many other finishes.  If that were to happen you'd have a much bigger problem on your hands.  So I would use a rod wrap epoxy.  It will not attack anything.

 

The repair won't be invisible, but with a thin application of the wrap epoxy, it should be pretty unobtrusive.

 

Better idea is to first send the pic to Daiwa and ask them what can be done.  If it all started with damage to the finish, like a hook digging into it, it's not a quality problem.  If it just formed on its own, it could have started with contamination on the rod when it was finished.