This paper investigates whether hedging or speculation is more prevalent in Indian futures markets by using Simple model, Market model and GARCH model for selected pharmaceutical sector by considering market capitalization as the benchmark indicator. The data consists of settlement prices and trading volume for the period from 1st January 2007 to 31st December 2011, the information retrieved from www.nseindia.com. The LMSW model reasoning has been adopted to estimate the variation in the informational asymmetry in the cross–sectional time series data, so that such analysis could produce biased standard errors to control the factors using a market proxy. The results of simple model, market model and GARCH model indicate that, the speculation dominates hedging in the most of the units. Therefore, the excess speculation in futures market could destabilize the underlying spot markets and leads to price discovery and price risk management. Overall, the speculators provide liquidity to the market; therefore, it is difficult to imagine a futures market functioning without speculators.