Custom Loop through category menu to include sub categories

Question

In my custom wordpress theme I currently have the below loop to the main categories

<?php
$menu = wp_get_nav_menu_object('navigation');
$items = wp_get_nav_menu_items($menu->term_id);
foreach($items as $item)
{
?>
    <li><a href="<?php echo $item->url ?>"><?php echo $item->title ?></a></li>
<?php
}
?> 

So it'll just list out each like so:

• Cat A
• Cat B
• Cat C
• Cat D

But I have now added some subcategories under Cat B so I would like to have it as so:

• Cat A
• Cat B
  • Cat B 1
  • Cat B 2
• Cat C
• Cat D

I know what to do regarding the html markup but what php command do I use in the loop to distinguish the subcategories?