In this image where the object is placed at the focus, the 2 reflected rays are parallel to each other. How then can we say that the image is highly magnified? The image must be of the same size as the rays are parallel and dont diverge. Please explain.

In a concave mirror when an object is placed at Focus the image is formed at infinity.

In the given ray diagram , AB is an object placed at the focus F.The ray AD incident on the mirror parallel to the principle axis gets reflected along DF passing through the focus. The other ray AE appears to come from the centre of curvature C and hence it gets reflected  back along EA. The two reflected rays DF and EA  are parallel to each other and thus they form image only at very very far away from the mirror where both the rays would meet at a point.(Image is formed at the point where the rays reflected from the mirror meet). In this case the rays being parallel they would meet only at very large distance from the mirror and hence we consider that they form the image at infinity.

This image will be real , inverted and magnified. It will be magnified as the size of the image is measured from the principle axis to the point where both the parallel rays meet ( Here the meeting point is at infinity). Hence we say that the image id formed at infinity and is highly magnified