You can create a fairly convincing rotational effect with 8 directions, depending on how you've drawn your graphics.
You can have smooth rotation of your object, and change it's directional animation at the points where 16 angles would exist; IE Change from 0 to 45 degree animation at angle ~22.5 degrees.
If you're using isometric sprites then this will probably not work very well (especially for human-type characters) but you may get away with it for certain objects (things like a moving vehicle tend to work out OK using this method). I find this works best using pseudo-isometric sprites (games like Legend of Zelda).
Of course if your game is overhead/birdseye view then you can do it with simply 1 angle only, so I assume you're using isometric?
~Sol
Thanks for your reply.
No, its not isometric. It's top down/view from front.
I don't really understand what you mean with 16 angles. Do you mean I should rotate the sprites from 22.5° to 45° i.e.?