Housing finance major HDFC Ltd is witnessing a sharp rally in the price of its convertible warrants, as HNIs and institutional investors rush to buy them to benefit from the price differential with the company’s stock. The warrants were selling at Rs 68.2 a piece this afternoon, marking a sharp rise of 86 per cent from its June low of Rs 36.6, brokers said.

The warrants can be converted into equity shares of HDFC Ltd at a price of Rs 600 per share, against the prevailing price of Rs 672 each. After taking into account the cost of warrants, investors can get the shares at Rs 668.2 through conversion, which is Rs 3.8 a share less than the prevailing price. Besides, the warrants would help the investor save about Rs 3 in transaction costs associated with the direct purchase of shares and over Rs 11 a share in interest costs, as immediate cash outgo would be much less — taking the total savings to nearly Rs 18 or about 2.7 per cent.