They don't seem to be since India exports buffalo-meat. But Mahisa has many positive connotations: 'f. a buffalo-cow, (grāmya-mahiṣī, a tame buffalo-cow); ‘powerfull woman,’ any woman of high rank, especially the first or properly conse- crated wife of a king, a queen consort, any queen, also means "great".'
See the following Mantra from the Rig Veda (RV):
brahmA devanAm padavih kavinAm (1)
rshir viprAnAm mahisho mrgAnAm (2)
shyeno grdhrAnAm svadhitir (3)
vanAnAm somah pavitramatyeti rebhan (4)
BrahmA among the Gods, the leader among seers (1), Rishi among the Vipras (can mean "the wise" or "a BrAhmin"), buffalo among all animals (2), hawk amidst the vultures, self-law among the delights (3), Soma goes singing over the purifiers (4).
Thus, the Mahisha or buffalo is given an elevated status among all the animals. Just like BrahmA enjoys an exalted position among all the Gods, the Rishis among the Vipras, similarly does the Mahisha among all animals.
Yes they are considered sacred. In the Rig Veda the bovine species, whether as buffalo or bull, lends its glamor to the evocation of the gods, Agni, Indra, Soma, and Varuna, the principal Vedic gods, are invoked as buffaloes. Much less frequently are they invoked as bulls. Indra is once praised as a buffalo great in "bull powers":
4 Even as he mounted up they all adorned him: self-luminous he travels clothed in splendour. That is the Bull's, the Asura's mighty figure: he, omniform, hath reached the eternal waters. 5 First the more ancient Bull engendered offspring; these are his many draughts that lent him vigour. From days of old ye Kings, two Sons of Heaven, by hymns of sacrifice have won dominion.
2 Wonderful, rich in nourishment, he dwells in food; next, in the seven auspicious Mothers is his home. Thirdly, that they might drain the treasures of the Bull, the maidens brought forth him for whom the ten provide.
- OF thee, the Bull, the Warrior, Sovran Ruler, joyous and fierce, ancient and ever youthful, The undecaying One who wields the thunder, renowned and great, great are the exploits, Indra.