I am not aware of what extent water can be added, but generally it will reduce the calorific value of the diesel which is already low (comparing to gasoline (petrol)). Physical properties like kinematic viscosity, cloud point and flash point, will be altered unless some additives (again these have to be environmental friendly or else they can cause more emissions) are added to emulsify, and have a homogeneous mixture. Diesel Engines are solely designed based on their physical and chemical properties. you can experience miss firing of engine, increase in HC and soot.

So, just adding water will not help in any extent, unless and until an additive which balances these above mentioned is used.

addition of water for diesel maybe extended upto 7% by volume.

stability is one of the major concern, apart from that increasing water increases the delay period, duration, fuel consumption and efficiency were also being affected.

The main objective of the injection of steam is the reduction of combustion temperature ie the reduction of NOx, and the injection of water for diesel limited to 5% by volume fraction fuel.

Hamza Bousbaa if I am not wrong, I believe this particular technique was put to use in 6 stroke engines, Where after the power stroke , water jet was sprayed, and it gets converted into steam, thus resulting in extra power stroke, as well as reducing the internal temperature of the combustion chamber.