Ganapathy,
Pages 5 and 7 of the PMP Credential Handbook describe the "ideal" PMP candidate. The focus described is clearly on "leading and directing cross-functional teams to deliver projects". I personally interpret the description on these 2 pages as follows:
If the functional manager is actively performing the duties of the project manager then he or she will have the necessary experience required by the exam prerequisites and the exam is for them. If, however, the functional manager is more of a "sponsor" and someone else is managing the project in the PM role, then the exam is not for them.