Thanks for all for the help, I got the solution.

In MYSQL Workbench, I have to go to Database > Manage Connections> Local Instance 3306(on left pane) >Syetemprofile.

In the system profile, the default Installation type is custom (god knows why). So I changed it to mac OS (MySQL Package). That way configuration file field defaulted to /etc/my.cnf.

Then I changed SQL Start and Stop Management to launchctl load -F /Library/LaunchDaemons/com.oracle.oss.mysql.mysqld.plist and launchctl unload -F /Library/LaunchDaemons/com.oracle.oss.mysql.mysqld.plist respectively.

Now as /etc/my.cnf file doesn't exist so we have to create that. For that I selected options file under Instances(spanner icon) on left pane of workbench. Now workbench will automatically find the my.cnf(which it was not able to earlier). In options file under General tab, I got the option to point the data directory to my folder in external SSD.

Still not done...

Now I went to MySQL under Apple system settings. Stop the Server. In the configuration tab, I selected the path to /etc/my.cnf. I deselcted the data directory field. Apply settings. Then again in Instances tab I restarted the server and now everything is fine.