The practice of hedging using derivatives by firms and its impact on the value of the firm has received much attention in the last few years. Its main motive is to study the relationship between hedging and firm value. This study focuses on the hedge effectiveness of financial derivatives used by BSE500 listed Indian manufacturing companies. The entire sample for the study was made up of 1845 firm year from 2016-2022. It also focuses to conclude if the results are consistent among the subsamples of large & small companies. Using Tobin’s Q as a measure of firm value and by employing different models; we find a positive and significant impact of derivatives use (hedging) on the firm value. We also find that within the subsamples the hedgers have a higher hedging premium as compared to the non-hedgers.