We have unravelled the electronic structure of a class of metamagnetic shape memory alloy Ni2Mn1+x In1-x by combining bulk-sensitive hard x-ray photoelectron spectroscopy and first-principles density-functional calculations. A sharp drop in the Ni 3d e(g) density of states forming a pseudogap in the martensitic phase transition (MPT) for x = 0.36 has been observed near the Fermi level. As a feature of MPT, hysteretic behaviour of this drop has been confirmed in both cooling and warming. This pseudogap is responsible for the giant negative magnetoresistance. The experimental result is well reproduced by the first principle calculation. We have also clarified theoretically that the MPT is linked to a competition of ferromagnetic and anti-ferromagnetic coupling between ordinary and anti-site Mn atoms.