why does the water potential increases when applied pressure is greater than the atmospheric pressure in a pure water?
As you know Water potential is directly proportional to pressure potential or hydrostatic pressure, i.e -
ψw = ψs + ψp
In case of pure water, ψs does not make any contribution towards water potential. Therefore , if the pressure is positive the ψw will be raised and if pressure is negative , ψw will be reduced.