I have water level data as well as elevation data. I just want to know the direction in which groundwater is flowing. I tried doing so using arc gis but I didn't help me much as it is giving me 8 direction method output.
Prem Baboo, You may understand/investigate the regional groundwater flow direction to observe the surrounding deep water sources like Ocean/Sea/River/other sources? Moreover, water flow always goes to the lower direction.
The topography and geology of an area are the major factors controlling regional groundwater flows. Regional groundwater flow directions are determined from contour maps of water table and potentiometric surfaces from available information on water levels, boundaries and location of recharge and discharge areas. Sulfer 16 software may be able to give a contour map showing
groundwater flow of a given area when data on elevation (topography), static water level, and coordinates of the water points are considered. The direction of flow in this case is observed from the direction of highest contour elevation to the lowest. In a regional situation especially on an area with rugged topography and difficult geology, the groundwater flows may be multi directional.
If I understand your question correctly you want to know how to use ArcGIS to get the groundwater flow direction.
I think you already know how to do this as you have realised that you will get only the eight direction output so you are using the method that Sakiba has given or some other similar method.
In Arc you will only have eight directions. This is because the raster calculations will only give you a direction form one cell (center) to the lowest value adjacent cell. As there are only eight cells to flow to, there are only eight possible directions, assuming no sinks are created. All Arc can do it tell you how water will flow form one cell to another. This should be sufficient for regional flow analysis as you are after the general direction.
Depending on the dataset and the density of your wells you can make the raster cells smaller , this will give you some more detailed looking flow paths but you are at risk of misinterpreting the accuracy of the flow paths.
Your other option is to create a set of contours form your raster with your data and use the steepest path tool. Depending on the rectangle you choose you can get an idea of the general direction.
The preferred option is to use raster calculations.