Despite the euphoric feeling on Dalal Street leading up to the Union Budget, CLSA's 'Modi stocks', which were expected to benefit from a favorable policy environment, have not seen similar increases and have instead been flat since the election result on June 4.

The international brokerage's 'India Bull Bear Index' now shows investors' mood at 92% optimistic, the highest level seen ahead of any Union Budget in the last 15 years. According to CLSA, such an elevated mood rating, along with stretched valuations, leaves the domestic market situation particularly vulnerable heading into the budget.

After a big 54 percent increase in the eight months coming up to the election results, Modi stocks have stayed flat, in sharp contrast to other sectors that have climbed by up to 12 percent.

This standstill is partly due to concerns that the budget's high expectations would result in broad disappointment across a big portion of the market, according to the brokerage.

CLSA identified 54 enterprises that would have benefited directly from the government's initiatives prior to the election result on June 4, with public sector undertakings (PSUs) accounting for half of these beneficiaries.

These companies are from the capex and infrastructure-related industries, PSUs, or stocks of some business houses. The firm refers to these as "Modi stocks," because they were surging on the likelihood of the BJP regaining power.

Following the election results, when the BJP failed to secure a clear majority in the Lok Sabha, CLSA retained only two of the stocks in its India focus portfolio: ONGC and Reliance Industries.