Azure Functions deployment in VS code using conda environment

I have been having a little bit of inconsistency issue with python settings in VS code while trying to run my azure functions locally. I am trying to avoid using the "venv" environment that VS code automatically sets for an azure function project and instead use a pre-created conda environment I made and have all the requirement installed in.Just to clarify, this is about local deployment and not azure portal.

myfunc__init__.py:

import json
import logging
import time

import azure.functions as func
import pandas as pd                    # Import Error happens here!

def main(req: func.HttpRequest) -> func.HttpResponse:
   ...

.vscode\Settings.json:

{
  // Local Machine Conda VENV (Define CONDAPATH in Windows Environment)
  "python.condaPath": "%CONDAPATH%",
  "python.pythonPath": "%CONDAPATH%\\envs\\azure\\python.exe",
  "azureFunctions.pythonVenv": "%CONDAPATH%\\envs\\azure",

  // Created Local VENV by VS Code (pythonPath is difference for MAC vs Windows)
  //"azureFunctions.pythonVenv": ".venv",

  // Azure Function Stuff
  "azureFunctions.deploySubpath": ".",
  "azureFunctions.scmDoBuildDuringDeployment": true,
  "azureFunctions.projectLanguage": "Python",
  "azureFunctions.projectRuntime": "~2",
  "azureFunctions.preDeployTask": "func: pack --build-native-deps",
  "debug.internalConsoleOptions": "neverOpen",
}

Note: If I replace the %CONDAPATH% with an actual absolute path to conda, the issue remains.

Just in case of need, launch.json is configured as bellow:

{
  "version": "0.2.0",
  "configurations": [
    {
      "name": "Linux_PyFunc",
      "type": "python",
      "request": "attach",
      "port": 9091,
      "preLaunchTask": "func: host start"
    }
  ]
}

When VS Code runs the functions, the deployment completes without issues and the local links are generated. Once I call the function via Postman, the return is HTTP 500 status which is due to not being able to import pandas with error module not found.

If I set "azureFunctions.pythonVenv": ".venv" in settings.json the functions gets deployed locally and once triggered/called, it returns HTTP 200 status and proper response.

So, this brings me to the question, if VS code supports conda environment for azure function deployment and if so, what am I missing here?