1993 Other Peugeot Models leakage in cooling system

I have a 1967 model Kaiser jeep CJ5 which has been fitted with a 4cyl peugot diesal engine manufactured for mahindra MM540 jeep.
The transmission remains the vintage 4speed mannual made for Willys CJ3B.

This engine was overhauled after clicking 100000 kms. It has now done fresh 20000 kms and after a recent long run for 300 odd kms, I have noticed water/droplet formation inside the tapitt cover.

Recent mechanical checks have confirmed no water leakage inside the engine's oil sump. The water level in the radiator remains more or less static.
The local checks also hint that the engine gasket and cylender head intact.

The vehicle runs perfectly OK, does not heat up, Engine Oil level remains and viscosity remains OK.
There is no engine misfiring noticed.

A mechanic has opined that the aluminum made engine head may have loosened leading to water vapours escaping from the engine tapit cover.

Please confirm the problem and remedy?